The federal government wishes to introduce some changes to the Registered Education Savings Plan (RESP) system in Canada.

As part of the 2023 budget released by the government on Tuesday, changes to the RESP system are planned as a way to improve the system that helps students pay for post-secondary education.

The federal government said that about 500,000 students withdraw money from the RESP program every year to finance their education, but the withdrawal limits have not increased for 25 years despite rising tuition fees.

Therefore, the 2023 budget proposed several ways to improve RESP plans for students and help them afford education costs.

The federal government also looks forward to increasing the withdrawal limit from RESP.

These limits will increase from $5,000 to $8,000 for full-time students, and from $2,500 to $4,000 for part-time students.

The government also plans to allow separated parents to open a joint RESP for their children.

The goal is to make it easier for parents to save for their children's post-secondary education.

What is the RESP program?

RESP is a savings account where parents can save money for their children’s post-secondary education.

Government grants such as the Canada Education Savings Grant or Canada Learning Bond or any specific provincial educational savings programs can be deposited into the RESP.

Also, once the student graduates from high school and enrolls full-time or part-time in a post-secondary program, parents can request to withdraw money from the RESP to help pay for their children’s study costs like tuition, books, and transportation.

What happens to RESP money if it is not used?

If RESP money is not used because the beneficiary does not pursue post-secondary education, there are five options.

Funds can be left in the RESP account in case the decision to return to study is made later, and the RESP account can remain open for up to 36 years.

Money can be transferred to another beneficiary to help them in their post-secondary education phase.

Funds can also be transferred to a Registered Retirement Savings Plan (RRSP), with a tax-free transfer possible up to $50,000.