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RESPs, Financial Aid, and Grant Money: Options For Financing Post-Secondary Education

February is a great time to educate students on finances and financial aid. This is an important topic for many, because attending college or university requires money, and the cost of post-secondary studies will continue to rise over the next decade.  In fact, by 2025, StatsCan estimates it will cost $95,750 for four years of college or university tuition.

Though borrowing money to attend a post-secondary institution may seem like the only option for some families, in Canada students have a unique education savings option in the form of a Registered Education Savings Plan (RESP). A major benefit of RESPs are the various government grants you could qualify for when you open one. This can help reduce your dependency on financial aid.

RESPs In a Nutshell

While RESP contributions are made with after-tax money by one or more plan subscribers, income within the plan is tax-sheltered until withdrawn, whereupon it is taxed at a student rate — and students typically pay little to no tax.. RESP Contributions may also remain in the plan for up to 35 years.

RESP withdrawals are known as Education Assistance Payments (EAPs), and may be used towards any expenses a student incurs while attending an eligible educational institution.

RESP contributions may be eligible for the Canada Education Savings Grant (CESG), Additional Canada Education Savings Grant (A-CESG) and the Canada Learning Bond (CLB), as well as certain provincial grants. This depends on several factors, including your location, your family income, and the age of the beneficiary. These grants may help families with RESPs save even more money.

Financial Aid Loans

The high cost of post-secondary education in Canada may lead students to borrow money to help finance their studies. Financial aid loans are available through the Government of Canada Student Loans Programs, as well as through financial institutions across the country. Students may not have to make payments on the loans while they’re in school,  but they will be expected to pay back the money borrowed (plus interest) once they leave school – whether they graduate or not.

It’s also important to understand that not everyone may qualify for a student loan, as eligibility may be based on several factors including parents’ income, and even their credit rating if considering a loan from a financial institution.

Grants and Scholarships

Grants, bursaries, and scholarships are merit or needs based funds that students do not have to pay back. They can be a valuable source of money to finance your education. To find out more about Canadian scholarships, visit The Government of Canada’s Scholarships page or talk to your school’s financial aid office.

In addition to private grants and bursaries from special interest groups, parents’ employers, or the colleges or universities themselves, Canada Student Grants are available to eligible students across the country. The only exceptions are students from the Northwest Territories, Nunavut, and Quebec (they offer their own territorial/provincial programs). These grants have a couple of key features: First, if you qualify for a Canada Student Loan, you’re automatically considered for most of these grants, except for the Grant for Services & Equipment for Students With Permanent Disabilities, which must be applied for on a separate form. Second, there are several different types of grants, including grants for low-income families, middle-income families, full-time students with dependents, and part-time students.

Saving for your children’s education can be challenging, yet the sooner you start planning, the less likely it will be that your child will require financial aid. And if an RESP is part of financial planning for post-secondary studies, students may qualify for additional grants, and avoid many of the headaches that come with student loans and other forms of financial aid.

If you’re looking for more information on RESPs and financing for your children’s education, I recommend you check out the Heritage Education Funds website and blog. Not only will you find more details on the topics covered here, you’ll also find helpful advice on things like budgeting, back-to-school shopping and more.

Heritage also has a newly updated FAQ section on their website. If you have any questions, feel free to take a look!
Happy February, and do your best to stay financially aware.