Don't panic — you have more options than you think. Here's a complete guide to every path available when a beneficiary skips post-secondary education.
If your child graduates high school and decides not to pursue post-secondary education right away, the most important first step is to wait. An RESP can remain open for up to 35 years after it was first opened. Many young people who skip school at 18 return to college, trade school, or university later in their 20s or even 30s.
The cost of keeping an RESP open while waiting is minimal — you simply stop contributing (no penalty for that) and let the existing investments continue to grow. If your child does eventually enroll in a qualifying program, the entire RESP — contributions, CESG, CLB, and investment growth — is available for use.
Leave the RESP open and wait. The plan can remain open for 35 years from the date it was first opened. Your investments continue to grow tax-sheltered. If the child enrolls in any qualifying educational program in the future — even a short-term trade course — EAP withdrawals become available again.
If you have another child who will pursue post-secondary education, you can change the beneficiary on an individual RESP (or redirect the family RESP funds). The new beneficiary must be under 21 years old. Investment income and contributions transfer freely. CESG transfers only if the new beneficiary is a sibling or the subscriber's child — otherwise grants must be repaid.
If you have available RRSP contribution room, you can transfer up to $50,000 of Accumulated Income from the RESP to your RRSP — completely avoiding the 20% AIP penalty tax. This is the smartest option for subscribers with RRSP room.
Conditions for RRSP rollover:
The CESG and CLB still get repaid to the government — you can only roll over the investment income on your own contributions, not the grants.
You can withdraw the investment income portion as an AIP — but this comes with a steep tax cost. AIPs are taxed at your marginal income tax rate plus an additional 20% federal surtax (12% in Quebec). This means if you're in the 33% federal bracket, the effective tax rate on an AIP could be 53%+.
AIPs should be a last resort — only take them if you have no RRSP room and no other options.
When closing an RESP where education won't happen:
| RESP Component | What Happens If No Education |
|---|---|
| Your original contributions | Returned to you, tax-free — always |
| CESG grants | Must be repaid to the government |
| CLB | Must be repaid to the government |
| Provincial grants (BCTESG, QESI) | Must be repaid |
| Investment growth on contributions | AIP: taxed at your rate + 20% penalty (or RRSP rollover) |
| Investment growth on grants | Repaid with the grants |
If you have RRSP room, the RRSP rollover transforms a worst-case scenario into a reasonable outcome. Here's how it works with an example:
Scenario: You contributed $45,000 to an RESP over 18 years. Your child doesn't pursue education. The RESP has grown to $90,000.
Result: You recover $45,000 tax-free + $37,800 in RRSP = $82,800 in total value (vs $90,000 peak), minus the $7,200 in grants repaid. Not a bad outcome for a worst-case scenario.
Many parents prematurely assume their child "won't go to school" when in fact numerous shorter or non-traditional programs qualify for RESP EAP withdrawals:
Always check whether a specific program qualifies before giving up on using the RESP. Many parents are surprised at how broad the qualifying criteria are.
KOHO's free savings account helps parents set aside RESP contributions every month. Earn cash back on everyday spending and redirect savings to your child's RESP.
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