How do Educational Assistance Payments (EAP) work?

The finish line is approaching and your child is about to graduate from high school? They will soon be able to start receiving Educational Assistance Payments (EAPs) under the terms of your Registered Education Savings Plan (RESP). When an RESP beneficiary graduates from high school and enrolls in a qualifying post-secondary program, they can start receiving payments to help them through this new stage of their lives.

Educational Assistance Payments (EAP) are made up of two categories of accumulated amounts:

• Visit government grants;
• Investment income accumulated over the years in the RESP.

The RESP capital (also called “savings”) refers to all contributions and belongs to the subscriber. While not part of EAPs, capital generates investment income when allowed to grow over time. Even though these contributions belong to the subscriber, they can still be transferred to the beneficiary.

As long as the beneficiary is enrolled in an eligible post-secondary education program, the Educational Assistance Payments belong to them. The EAP amounts paid to the beneficiary are added to their income and must be included in their annual tax return.

• It is generally more advantageous to spread the process over several fiscal years.
• Although the capital is tax-free and can be withdrawn at any time, it may be worthwhile to keep it in your RESP. Indeed, these savings will continue to generate income for as long as the account remains open.

Depending on the post-secondary program chosen by the beneficiary, certain EAP restrictions may apply.

• In the case of a full-time program, a withdrawal of up to $8,000 is permitted during the first 13 weeks of the program. Once these first 13 weeks have been completed, there is no longer a limit on the withdrawal amounts¹.
• In the case of a specific training program, i.e., part-time, a withdrawal of up to $4,000 is permitted during the 13 weeks of the program. However, the withdrawal must be made at the end of these 13 weeks and not before.

In special cases where expenses related to the first 13 weeks of study are higher than average and exceed the $8,000 or $4,000 permitted, Employment and Social Development Canada may authorize a higher EAP withdrawal. To do so, the RESP provider must submit a special application to the Canada Education Savings Program. Certain conditions apply, depending on the beneficiary’s specific situation and program of study.

When the beneficiary starts their post-secondary studies, the subscriber can begin making RESP withdrawals and the beneficiary can use the funds for all education-related expenses:

• Tuition fees;
• School supplies;
• Transportation costs;
• Living expenses (housing, food, bills, etc.).

Keep in mind that EAPs are used solely to finance the beneficiary’s post-secondary education. If withdrawals are made to cover other types of expenses, the amounts withdrawn are considered accumulated income payments (AIPs) and will be taxed accordingly.