Why choose an RESP loan?

3 min.

Already investing in your children's future by contributing to a registered education savings plan (RESP), but not taking full advantage of government grants? Discover the advantages of an RESP loan.

The RESP: Investing in your children’s future

Like all parents, you want to help your children achieve their dreams. To do that, many people open RESPs when their children are still young, so they can grow their contributions tax free and benefit from government grant programs to help fund their children’s post-secondary education.

But did you know that you can contribute up to $2,500 to an RESP per child, per year? If you have two children, for example, you should be saving $5,000 per year for their post-secondary education, or $416 per month. However, it can be difficult to have funds available to reach this level of contributions.

Thanks to the RESP Loan, you can maximize your RESP contributions without changing your budget.

Maximize your contributions with the RESP Loan

The RESP Loan can help you contribute more to your child’s RESP and take full advantage of generous government grants, without going over budget.

The way the RESP Loan works is simple: in addition to your contributions, you also deposit the borrowed amount into your child’s RESP. Combined, these amounts will help you receive government grants. The more you contribute to your RESP, the more you receive in grants, up to an annual maximum. The total accumulated amount of your contributions, the loan, and the grants will generate returns which will grow the RESP as time goes on, tax free.

More savings for your child

If your contributions are less than $208 per month, or $2,500 per year, you might be missing out on substantial grants. Why turn down these generous grants offered by the government for your child’s future?

If you get started early on saving in your child’s RESP and you contribute the maximum amount, based on your province of residence, you can receive up to $10,800 in grants! You can take advantage of this significant amount by borrowing for your child’s RESP. By the time your child is ready to start post-secondary education, they can devote themselves entirely to their career, without worrying about the finances.

Recover government grants from previous years

An RESP loan also gives you the option of recovering unused grants from previous years and, based on how much you contribute, doubling your grants, without spending a dime! The total return from your RESP is increased because the additional amounts from the loan and the grants received through the loan are invested.

What happens when your child is ready to start post-secondary education

For parents
When your child is old enough to start post-secondary education, you’ll receive back the amounts that you deposited into the RESP and you’ll pay back the amount of the loan and the interest on the loan. You can also use part of the recovered contributions to pay back the loan interest.

More money for your child
Your child will receive the grants and the returns accumulated in the RESP which were generated from your contributions, the grants and the loan. The accumulated amount will be much higher than they would have received without the RESP loan.

Need advice?

Learn more from your financial advisor who can help you get the most for your child’s RESP.

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