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Take advantage of the Canada Education Savings Grant (CESG)
One of the main advantages of an RESP is that you are entitled to receive the Canada Education Savings Grant (CESG). This grant, which came into effect at the beginning of 1998, and subsequently amended in the 2007 federal budget, represents 20% of the first $2,500 of annual contributions, up to $500 per year per beneficiary.
It is also possible to use unused grant room from previous years (until 1998, if the child was born). And the maximum amount under a CESG that may be awarded for each child born after 1997 is $7,200 for the duration of the plan.
How are the payments made?
Educational assistance payments (EAP) will be made to the beneficiary in keeping with the subscriber's instructions. The total EAP that may be paid out before the end of the first session of full-time studies (normally a period of 13 consecutive weeks) is $5,000* ($2,500 in the case of part-time studies). Thereafter, if the beneficiary needs all the investment income and the entire grant the same year to cover tuition fees, there is no limit and the entire amount may be withdrawn.
Recovering the funds if the beneficiary does not pursue post-secondary studies
If the RESP beneficiary does not pursue post-secondary studies and if no other beneficiary is (or can be) appointed, the grants must be returned and the subscriber's contributions will be returned. Also, the subscriber** may receive the income generated from the RESP in the form of an accumulated income payment, under certain conditions.
* The amount may be higher for certain programs known to have higher tuition fees.
** A trust may not serve as a subscriber.
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