Should You Cancel Your RESP If Your Kid Won’t Go?

If you’re wondering whether to cancel your RESP because your child is not going to school, you’re not alone—and the good news is that cancelling isn’t your only option. Surprisingly, an RESP can stay open for up to 35 years, giving your child decades to change their mind. In this guide, you’ll learn exactly what happens to your contributions, government grants, and investment growth when your child skips post-secondary education. We’ll cover RESP withdrawal options in Canada, how to transfer funds to a sibling, and whether taking an Accumulated Income Payment makes sense for your situation.

What Happens If You Cancel Your RESP When Your Child Isn’t Going to School?

Before you rush to close your RESP, it’s crucial to understand what you actually have in the account. Your RESP contains three separate pots of money, and each one gets treated differently if your child doesn’t pursue education.

Your Contributions Come Back Tax-Free

The money you personally contributed over the years? That’s always yours. You can withdraw your contributions at any time without paying a penny in taxes. This makes sense—you already paid income tax on that money before depositing it. If you contributed $30,000 over 15 years, you get that $30,000 back with no strings attached. Remember, RESPs have a lifetime contribution limit of $50,000 per beneficiary — separate from the $7,200 CESG grant limit.

Government Grants Must Be Returned

Here’s where it stings. The Canada Education Savings Grant (CESG) matches 20% of your contributions up to $500 per year (or $1,000 with carry-forward room). If your child doesn’t use the RESP for education, every dollar of CESG goes back to the federal government. The same applies to provincial grants like the Quebec Education Savings Incentive or the BC Training and Education Savings Grant. You don’t keep any of it.

Investment Growth Faces Special Rules

The third pot—your investment earnings—has the most complicated rules. This money grew tax-sheltered inside the RESP, and the CRA wants their share if it’s not used for education. We’ll cover exactly how this works in the AIP section below.

Should You Cancel Your RESP or Wait It Out?

The 35 -year rule changes everything for families facing this decision. According to the federal government, an RESP can remain open for up to 35 years from the date it was opened. That means if you started contributing when your child was born, the plan doesn’t need to close until they’re in their mid-thirties.

Why Waiting Often Makes Sense

Life rarely follows a straight path. Your 18-year-old who “definitely isn’t going to university” might feel differently at 25 after working for a few years. Trade schools, college programs, apprenticeships, and many certificate programs all qualify as eligible educational institutions. Even part-time studies can trigger Educational Assistance Payments (EAPs) from the RESP.

If you’re also managing other financial decisions right now, like whether to prioritize your RRSP or pay down your mortgage at renewal, keeping the RESP open gives you one less thing to worry about while you focus on more pressing matters.

When Closing Might Be the Right Call

Sometimes waiting doesn’t make sense. If your child is firmly established in a career that doesn’t require credentials, if they’re already in their late twenties with no educational plans, or if you need the money for other financial priorities, closing the RESP and taking an AIP could be reasonable. The key is running the numbers first.

RESP Transfer to Sibling: Your Best Option for Unused Grants

If your child won’t use their RESP but you have another child under 21, transferring the funds is often the smartest move. According to Sun Life, if one child doesn’t use the RESP, you can transfer the savings to another child, often without penalty.

How Sibling Transfers Work

When you transfer an RESP between siblings (or other family beneficiaries), your contributions move over seamlessly. The government grants can also transfer, but only if the new beneficiary has enough CESG room to absorb them. Each child can receive a maximum of $7,200 in lifetime CESG. If the receiving sibling has already maxed out their grants, the excess goes back to the government.

Tax-Free Transfer Requirements

To transfer without tax implications, the RESP must be a family plan (or you must convert an individual plan to include the new beneficiary), and the new beneficiary must be under 21 years old. The transfer must happen before the plan’s 35th year. Working with your RESP provider—whether that’s TD, RBC, BMO, or a robo-advisor like Wealthsimple—ensures the paperwork is handled correctly.

💡 Pro Tip: Before transferring to a sibling, calculate their available CESG room first. If your older child received $5,000 in CESG and your younger child has already received $3,000 in their own RESP, only $4,200 of additional CESG room remains in the younger child’s $7,200 lifetime limit. Any CESG beyond that gets returned to the government regardless of the transfer.

Comparison: RESP Withdrawal Options When Your Child Doesn’t Go to School

Understanding your choices at a glance helps you make the right decision. Here’s how the main RESP withdrawal options in Canada compare:

How to Take an AIP: Step-by-Step Process

If transferring isn’t an option and your child definitely won’t pursue education, an Accumulated Income Payment lets you access the investment growth in your RESP. Here’s exactly how it works.

Step 1: Confirm You Meet AIP Eligibility

To qualify for an AIP, your RESP must have been open for at least 10 years, all beneficiaries must be at least 21 years old and not pursuing education, OR you must be a Canadian resident and the plan has existed for over 35 years. You’ll need to provide documentation to your RESP provider proving these conditions are met.

💡 Pro Tip: If you have a family plan with multiple beneficiaries, ALL beneficiaries must meet the age-21- plus and no-education criteria before you can take an AIP. If even one sibling is still under 21 or pursuing education, the plan generally must remain open for that beneficiary, even if your other child has definitively moved on.

Step 2: Return the Government Grants

Before you receive any AIP, the CESG and any provincial grants must be returned to the respective governments. Your RESP provider handles this automatically—you don’t need to write a cheque to Employment and Social Development Canada yourself. If you received $7,200 in CESG over the years, that entire amount goes back.

Step 3: Withdraw Your Contributions Tax-Free

Request a withdrawal of your original contributions. This money comes to you with zero tax consequences. You can deposit it into your TFSA (contribution room permitting—the 2026 TFSA limit is $7,000, with cumulative room around $109,000 if you’ve never contributed), use it to start a new investment portfolio, or put it toward any other financial goal.

Step 4: Decide Between AIP Cash or RRSP Rollover

For the investment growth portion, you have two choices. Taking cash means paying your marginal tax rate plus an additional 20% penalty tax. Alternatively, you can roll up to $50,000 of the growth into your RRSP (if you have the contribution room), completely avoiding the penalty tax. The RRSP rollover is almost always the better option if you have room available.

Common Mistakes When Closing an RESP

Parents often lose money unnecessarily when handling unused RESPs. Avoid these costly errors.

Closing Too Early

The biggest mistake is panicking and closing the RESP the moment your child says they’re not going to school. Remember: 35 years. Trade programs, online certificates, culinary school, and community college courses all count. Even a single semester of part-time studies lets your child access some Educational Assistance Payments while keeping grants intact.

Ignoring the RRSP Rollover

Taking an AIP as cash when you have RRSP room is like voluntarily paying a 20% penalty. If you have $40,000 in RESP growth and $40,000 in RRSP room, rolling it over saves you $8,000 in penalty taxes alone. Check your Notice of Assessment from the CRA to confirm your available RRSP contribution room before making any decisions.

Not Considering All Beneficiaries

Family RESPs allow you to name multiple beneficiaries. If you have nieces, nephews, or grandchildren who might pursue education, adding them as beneficiaries could preserve the grants. This requires careful planning and should be discussed with your financial institution.

💡 Pro Tip: A family RESP can include multiple children from the start — you don’t need to set this up only after one child decides not to attend school. If you have more than one child, opening a single family RESP (rather than individual plans) gives you maximum flexibility to shift funds and grants between children as their educational paths unfold differently over the next 35 years.

Forgetting About Part-Time Studies

Your child doesn’t need to attend school full-time to access RESP funds. Part-time enrollment at a qualifying institution still allows for Educational Assistance Payments, though the amounts are more limited. Even taking one or two courses per semester could help your child access the grants before they’re clawed back. If your family is dealing with financial pressure while figuring this out, focusing on reducing financial stress first can help you make clearer decisions.

Key Takeaways

• Your RESP can stay open for up to 35 years—don’t rush to close it just because your child isn’t attending school right now.
• All CESG grants (up to $7,200 lifetime per child) must be returned to the government if the money isn’t used for education.
• Transferring RESP funds to a sibling under 21 can preserve both contributions and government grants if the receiving child has grant room.
• Rolling up to $50,000 of RESP investment growth into your RRSP avoids the 20% AIP penalty tax—use this option if you have contribution room.
• Your original contributions are always returned to you tax-free, regardless of which withdrawal option you choose.
• Part-time studies at colleges, trade schools, and certificate programs all qualify for RESP withdrawals—it doesn’t have to be university.

Frequently Asked Questions

Do I have to pay back CESG if my child doesn’t go to school?

Yes, you must return all Canada Education Savings Grant money if your child doesn’t attend a qualifying post-secondary program. The CESG was provided specifically to help fund education, so when that education doesn’t happen, the government reclaims it. This applies to both the basic CESG and any Additional CESG received by lower-income families. The grants are returned automatically through your RESP provider when you close the plan or take an Accumulated Income Payment.

What’s the difference between RESP contribution years and the total time the plan can stay open?

These are two different deadlines that often confuse parents. You can make NEW contributions to an RESP for up to 31 years from when it was opened. However, the plan itself can remain open — holding investments, earning CESG-matched growth, and waiting for your child to enroll in education — for up to 35 years total. After year 31, you simply can’t add new money, but existing funds can keep growing and waiting to be used for another 4 years. CESG eligibility ends even earlier: the grant is only available until December 31 of the year your child turns 17.

Can I transfer my RESP to another child or myself?

You can transfer an RESP to another child (sibling, niece, nephew, or grandchild) if they’re under 21 and related to the original beneficiary by blood or adoption. This transfer can include government grants, provided the new beneficiary hasn’t already maxed out their $7,200 lifetime CESG limit. You cannot transfer an RESP to yourself as a beneficiary, but you can withdraw your contributions tax-free and roll up to $50,000 of investment growth into your own RRSP if you have the room.

What is an AIP and how much tax will I pay on RESP withdrawals?

An Accumulated Income Payment (AIP) is a withdrawal of the investment growth from your RESP when the funds aren’t used for education. You’ll pay your regular marginal income tax rate on the AIP amount, plus an additional 20% penalty tax. For example, if you’re in a 30% tax bracket and withdraw $20,000 as an AIP, you’d owe roughly $10,000 in combined taxes. However, you can avoid the 20% penalty by rolling up to $50,000 into your RRSP if you have available contribution room.

Deciding whether to cancel your RESP because your child is not going to school requires careful consideration of all your options. In most cases, keeping the plan open, transferring to a sibling, or rolling growth into your RRSP beats closing the account and losing grants. Take advantage of the 35 -year window, explore alternative educational paths, and run the numbers before making a final decision. For more strategies to maximize your family’s registered accounts and build long-term wealth, explore the rest of Getwealthy’s Canadian personal finance guides.