Saving money as a mature student

Whether you’re considering a first-time university degree to change career paths or looking to add educational leverage in your current career, there are a lot of reasons to go to university after your early 20s.

But continuing your education can mean more than paying for tuition: it likely means losing all or some of your regular paycheque. So, how can you go back to school without breaking the bank? And can RESPs, TFSAs, RRSPs or any other four-letter acronym help make it affordable?

Registered Education Savings Plans (RESPs)

If you’ve never used an RESP before, this may be your chance. The main advantage of an RESP is the 20% government contribution from the Canada Education Savings Grant (CESG). But, since you’re older than 17, you’re no longer eligible to receive it.

RESPs are taxed in a student’s hands, so if you plan to work while in school and manage to pull in a high income, RESPs may not be the best idea. If you don’t work, there would be no tax consequences unless you have other sources of income.

Also, if you don’t finish your degree, then the RESP can roll over to your RRSP. (Though if you’d received any government grants, you’d have to pay them back.)

Tax-Free Savings Account (TFSA)

A TFSA has several benefits:

• Less paperwork than RESPs

• Tax-free, with no limitations or tax hits when you withdraw money
• Anyone can contribute, including a higher-earning spouse or generous parents

Also, if you don’t finish your degree, your TFSA still isn’t subject to tax.

Registered Retirement Savings Plan (RRSP)

You might want to consider using an RRSP through the Lifelong Learning Program.

You can withdraw up to $20,000 from your RRSP to fund your education, with a cap of $10,000 per year. You’d also have adhere to following regulations:

• You must own an RRSP;

• You must enroll full-time (unless you meet disability conditions);
• You have to live in Canada;
• You must enroll in a qualifying educational program at a designated educational institution; and
• You’ll need to do so before you turn 71.

While funds you withdraw are interest-free, they need be repaid within 10 years. Repayments begin the fifth year after you first withdrew funds. Each year, you’ll have to repay at least one-tenth of the total amount withdrawn.

Also, if you will be earning income while going to school, you’ll receive no tax advantages (other than no withholding tax on money coming out).

Tax credits

There are also tax credits for students. If you get a student loan through the Canadian government, you could deduct the interest charges.

And, you can claim full- and part-time education costs on your tax return. For instance, a scholarship or bursary would be exempt from tax. And most tax credits can be transferred to a spouse, or carried over to another year.

Returning to school will almost certainly mean at least a short-term financial cost, but making the most of your options can make it a far more affordable choice.