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Three Ways to Fund Tuition Costs

A big part of financial planning often involves education funding. Here are some methods recommended by Canadian Certified Financial Planners.

It may seem too early to think of those back-to-school days of Fall, but it’s never too early to start planning for your child’s education costs. Unsurprisingly, tuition costs aren’t getting any cheaper. Fortunately, there are some avenues for financial help.

RESPs: The first step we recommend is a Registered Education Savings Plan (RESP). Unlike an RRSP, contributions to an RESP are not tax-deductible, but your savings can grow tax-free until your child is ready for post-secondary education. You may contribute up to $4,000 per child per calendar year, to a lifetime maximum of $42,000 per child.

With the Canada Education Savings Grant (CESG), the Canadian government will add an additional 20% on the first $2,000 in annual contributions for each beneficiary. The grant applies to a lifetime maximum of $7,200 per beneficiary.

Once your child is ready to attend a post-secondary institution, they can withdraw the RESP funds to cover tuition and other eligible costs. Accumulated earnings in the plan will be taxable for the student, though most students earn little income and therefore don’t pay any tax. If your child decides against post-secondary education you have several options for handling the Plan’s assets (the CESG portion must be returned to the federal government).

Dollars for Scholars: Thousands of scholarships are available each year that are essentially free money for the taking. It’s a misconception that only star athletes and straight-A students need apply; many scholarships have a wider range of qualifying criteria. Scholarship committees are looking for well-rounded students, who may not get 97% in Math but are actively involved in community service. Awarded amounts are usually in the $500 to $2,500 range. The deadline for most scholarships falls in the student’s senior year of high school, but some scholarships are awarded in earlier years and held in a trust until the student is accepted to university. Visit www.scholarshipscanada.com for comprehensive listings.

Credit options: Federal programs are available to help fund student education. In Ontario, OSAP provides loans that don’t accumulate interest until the student completes their studies. OSAP applicants are also eligible for interest relief programs, and the Canada Student Opportunity Grant. You may also need a student line of credit, available from most major banks and some credit unions. Full-time students can borrow up to an annual maximum (usually around $8,000 per year).

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