If your child doesn’t go

“What if she never goes to university?” You don’t lose your money.

Q: What happens to the money if my child doesn’t go to post-secondary?

If a beneficiary does not pursue post-secondary education, the subscriber's contributions are returned tax-free. Government grants including the Canada Education Savings Grant and Canada Learning Bond are repaid to the government. The investment income can be transferred to an RRSP, paid out as a taxable Accumulated Income Payment, or in some circumstances rolled into a Registered Disability Savings Plan.

Q: How long can I leave the plan open?

A Registered Education Savings Plan can generally remain open for 35 years from the date it was entered into, or 40 years for a specified plan where the beneficiary qualifies for the disability tax credit. Keeping the plan open preserves the option of qualifying education later.

Q: Does it have to be university?

Qualifying educational programs for RESP purposes include colleges, CEGEPs, trade schools, apprenticeship programs, and many part-time and distance-learning programs, in Canada and in some cases abroad. Eligibility is not limited to university degrees.

Q: Can another child use it instead?

Funds can often be used by a sibling, either within a family plan or by transfer to a sibling's plan, subject to age and relationship conditions. The Canada Learning Bond is tied to the individual beneficiary and cannot be transferred to a sibling. Ineligible transfers trigger repayment of grants.

Q: What is an Accumulated Income Payment, and what does it cost?

An Accumulated Income Payment is a payment of the investment income in an RESP to the subscriber. It is included in the subscriber's income and attracts an additional tax of 20 percent, or 12 percent for Quebec residents. Conditions apply: generally the plan must have been open approximately ten years with all beneficiaries aged 21 or over and not eligible for educational assistance payments, or the plan must have reached its 35th anniversary, or all beneficiaries must have died. The subscriber must be a Canadian resident.

Q: What if my child has a disability?

Where the RESP beneficiary is also the beneficiary of a Registered Disability Savings Plan, accumulated income may in defined circumstances be rolled over into the RDSP rather than taken as a taxable payment, subject to the RDSP's $200,000 lifetime contribution limit and to specific conditions.

It’s the question that stops more Canadian parents from opening an RESP than any other — and the honest answer is far less frightening than the silence around it. Your contributions always come back to you, tax-free. Here is exactly what happens to every dollar.

The straight answer

Three pools, three different outcomes.

Your contributions are returned to you tax-free, always. The government grants are repaid to the government. Only the investment income carries a real decision — and even that has options far better than simply cashing out.

Notice what is not on that list: losing your own savings. The worst realistic outcome is that you get your money back, hand back money the government gave you, and pay tax on the growth. That is not a catastrophe — and there are three ways to improve on it.

Before anything else: check what actually counts as school

Qualifying programs are much broader than a university degree — colleges, CEGEPs, trade schools, apprenticeships, and many part-time and distance programs can qualify, in Canada and often abroad. A great many families who assume the plan is wasted find it isn’t. Check before you conclude anything.

ContributionsYours. Returned tax-free, whenever you ask, no conditions.

GrantsRepaid to the government if the plan is collapsed without qualifying education.

GrowthTaxable — unless you move it somewhere sheltered instead.

Free estimator

What would collapsing the plan actually cost?

This shows the difference between cashing the growth out and sheltering it in an RRSP first — which for most families is the single biggest decision on this page.

Your contributions in the plan $30,000

Government grants in the plan $6,000

Investment growth in the plan $14,000

RRSP room you have available $20,000

Up to $50,000 of the growth can move to your or your spouse’s RRSP over a lifetime, if you have room.

Your marginal tax rate 43%

You would keep, after tax

Contributions returned to you (tax-free)$0

Grants repaid to the government$0

Growth sheltered into your RRSP$0

Tax on the growth taken in cash$0

Runs entirely in your browser — we don’t store or see your numbers. It applies the published federal treatment: contributions returned tax-free, grants repaid, and remaining income taxed at your marginal rate plus an additional 20% (12% for Quebec residents — this estimator uses 20%), with up to $50,000 of income transferable to an RRSP where room exists. It assumes the conditions for an Accumulated Income Payment are already met and does not model provincial variations, withholding, or the effect of the RRSP deduction on your overall return. Educational illustration only — get tax advice before collapsing any plan.

Talk through the options → How RESP withdrawals work

In order of preference

Six things to do before you collapse the plan.

Usually best

Wait. Just wait.

The plan can stay open for 35 years — 40 for a specified plan. A nineteen-year-old with no interest in school is often a twenty-four-year-old in an apprenticeship. Waiting costs nothing; collapsing is irreversible, and the grants don’t come back once repaid.

Usually best

Let a sibling use it

A family plan lets siblings share contributions and, within limits, the grant. Individual plans can often transfer to a sibling’s plan too, subject to age and relationship conditions. The Canada Learning Bond is the exception — it stays with the child it was paid for.

Check what counts as a qualifying program

Trade school, apprenticeship, college, CEGEP, many part-time and distance programs, and often study abroad. Families write plans off far too early because they’re picturing a campus.

Move the growth to your RRSP

Up to $50,000 over your lifetime can go to your own or your spouse’s RRSP if you have the room — sheltering it from both the regular tax and the extra tax. It needs the right forms through your promoter, so arrange it deliberately.

If there’s a disability, look at the RDSP route

Where the RESP beneficiary is also an RDSP beneficiary, the growth can in defined circumstances roll into the RDSP instead of being taxed out, within the RDSP’s $200,000 lifetime limit. The conditions are precise — get specialist advice.

Only then, take the payment

The growth is added to your income and taxed an extra 20% (12% in Quebec). Conditions apply before it’s even permitted. It’s a legitimate option — just the last one, not the first.

Common questions

Questions worried parents ask

What happens to the money if my child doesn’t go to post-secondary?

Your own contributions always come back to you, tax-free. That part is never at risk and never taxed — it was never deducted going in. The government grants are repaid to Ottawa. The investment income is the only piece with a real decision attached: it can go to your RRSP, be paid out with extra tax, or in some cases move to a Registered Disability Savings Plan.

How long can I leave the plan open?

Up to 35 years from when the plan was opened — 40 years for a specified plan, which generally applies where the beneficiary qualifies for the disability tax credit. That is a lot of runway. A nineteen-year-old who isn’t interested in school today may well be twenty-four and enrolled in a trade programme later. Waiting costs nothing, and closing early is irreversible.

Does it have to be university?

No — and this is where a lot of unnecessary worry comes from. Qualifying programs are far broader than a degree: colleges, CEGEPs, trade schools, apprenticeship programs, and many part-time and distance programs can qualify, in Canada and often abroad. Before assuming your child will never use the plan, check what actually counts. Many families discover the money is usable after all.

Can another child use it instead?

Often yes, and it’s usually the best outcome. A family plan lets siblings share contributions and, within limits, the grant. Even with an individual plan, funds can generally be transferred to a sibling’s plan, subject to age and relationship conditions. The Canada Learning Bond is the exception — it belongs to the child it was paid for and does not move to a sibling. Check the conditions before moving anything, because an ineligible transfer triggers repayment.

What is an Accumulated Income Payment, and what does it cost?

It’s the investment income paid out to you — and it is taxed twice over. The amount is added to your income for the year and attracts an extra tax of 20% (12% for Quebec residents). For a higher-income subscriber the combined effect can exceed half the amount. You can only take one if conditions are met — generally the plan has run about ten years and every beneficiary is 21 or older and not eligible for an educational payment, or the plan has reached its 35th year, or all beneficiaries have died — and you must be a Canadian resident.

How do I avoid the extra 20% tax?

Move the income into an RRSP instead of taking it in cash. Up to $50,000 of Accumulated Income Payments can be transferred directly to your own or your spouse’s RRSP over your lifetime, provided you have the contribution room — and a properly completed transfer avoids both the regular tax and the extra tax on the amount moved. It requires the right paperwork with your promoter, so plan it rather than improvising it.

What if my child has a disability?

There’s a route most families don’t know about. Where the beneficiary of the RESP is also the beneficiary of a Registered Disability Savings Plan, the accumulated income can in defined circumstances be rolled into the RDSP instead of being taxed out — subject to the RDSP’s $200,000 lifetime contribution limit and to conditions, including where post-secondary education is not possible because of a mental impairment. It’s worth specialist advice, because the conditions are precise and the outcome is significantly better than cashing out.

Let’s talk

Don’t let this question stop you starting.

If you’ve been putting off opening an RESP because of the what-if, that hesitation has probably already cost you more in unclaimed grants than the worst-case outcome ever would. A free call: what the realistic downside actually looks like for your family, and how to build the plan so it stays flexible.

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Harpreet Singh · Licensed advisor (LLQP, Ontario) · Proudly Canadian. This page is general information only — not financial, investment, insurance, or tax advice, and not a recommendation to collapse, retain, or transfer any plan. The rules governing qualifying educational programs, grant repayment, Accumulated Income Payments and the conditions for making them, RRSP and RDSP transfers, plan duration, and the additional tax (20%, and 12% for residents of Quebec) are set by the Government of Canada, administered by the Canada Revenue Agency and Employment and Social Development Canada, and may change; details reflect published guidance current at the time of writing and should be confirmed at canada.ca. Individual plan terms may be more restrictive than federal rules. Tax outcomes depend on your full circumstances — obtain tax advice before collapsing a plan. The estimator is an educational illustration based on the figures you enter and uses the 20% additional tax rate. Speak with a qualified advisor about your own situation.

Written and reviewed by

Harpreet Singh

Licensed Advisor · LLQP, Ontario

Harpreet is a licensed insurance and education-savings advisor based in Ontario, Canada. He helps families understand RESPs in plain language, claim every government grant they qualify for, and protect the plan with the right coverage — with straight answers and no pressure. More about Harpreet →

Reviewed July 2026 Figures per Canada.ca / CRA LinkedIn Book a free call