⚠️ Note: This article was originally written in 2010. Many of the frustrations and hidden admin costs in the RESP withdrawal process remain relevant today. Online banking and electronic document submissions have become more common. However, some universities and financial institutions still require printed confirmation letters. Yes, some still charge for them. Read on for a cautionary tale that still holds valuable lessons for Canadian parents navigating the RESP system.
🔗 A shocking RESP add on at the end too!
This whole process of getting money out of an RESP has now turned into a money-making business for everyone. Of course, it does not include me. The excellent aspect of the RESP program is that it provides money to get money. Unfortunately, universities are trying to make their own money as well.
All 3 universities I am dealing with seem well prepared for me because on their websites are effectively the statement:
Dear Parent of our Student,
If you thought that extricating your money from an RESP would involve us simply sending you a free letter, reconsider. Or did you expect us to send you an e-mail stating this? Think again. We feel that sending out a letter to you should be a paid service. This letter confirms your payment for your child’s education. We all agreed that the bank won’t take our receipt from your payment. That would be too easy. Therefore, you will need to pay us $11.50 for this letter.
Please note: this is not an actual letter from any Canadian University. It is a paraphrase of the message sent. There is much embellishment by me.
Do I sound bitter? If not, I need to take that creative writing class on how to write more bitterly.
RESP withdrawal fees💰
Most of this money is after-tax money and will not be taxed if I withdraw it from the account. This applies whether my child is at school or not. It will not be considered in any fashion. Yet, to extricate Dime One from this account, I must have this letter. I must go to a local bank branch. This process does not work over the phone or online. I need to have them approve my request to take the money out. Will there be a fee for my bank to approve this letter? Right now, I would not be surprised (but even more bitter? You Bet!) but I hope not.
I am displeased as punch about this whole thing, as you can tell. However, at least I know about it now, so I may get money out of this sometime before Thanksgiving (I hope). The other issue is I must get these documents from two separate universities (in different provinces), and I have not heard from my other daughter what fee her University will extricate from me to get at the RESP.
So when you think about the CESG that you get when you put your money in an RESP, remember to subtract this fee (a yearly thing I must do) from your "takings" in this Government Savings Plan.
🔗 A useful Government link about RESPs in general.
Sudden Shocks People Who Think They Understand RESP Withdrawals?
What surprises many parents is that RESP withdrawals are not automatic, not guaranteed, and not tax-free across the board. Most banks won't mention that when they try to wangle you into opening a "Mutual Fund" RESP account.
RESPs have two portions:
- PSE withdrawals (Post-Secondary Education) = your contributions (non-taxable when withdrawn). This was the money you put in and it has already been taxed.
- EAP withdrawals (Educational Assistance Payments) = CESG + growth (taxable to the student). Keep that in mind, when taking money out.
If your child is not enrolled full-time in a qualifying program, or if you withdraw too much from the wrong portion, you could:
- Trigger early taxation penalties
- Lose CESG funds
- Be forced to return grants if your child drops out too early
Even worse? If you miss deadlines or fail to submit the right tuition confirmation, your bank will not release the money. Parents juggling multiple universities (like in this article) must coordinate receipt requests from each school. They must follow each bank’s exact withdrawal protocol.
That’s the catch:
RESPs are great (don't get me wrong, free money is always good) —but only if you navigate the bureaucracy perfectly. One missing document can delay tuition payments or lead to paying out-of-pocket first. Your child will get an education, but so will you, in government red-tape.
➡️ Canada.ca: Frequently asked questions for the Registered Education Savings Plans (RESPs)
Anytime I read the words “free money,” I mentally follow it up with, “and if you believe that…”
Am I the only one that thinks the whole fee thing is a bit overblown? It’s a $12 fee for the university to give you a confirmation of enrollment letter, which will allow you to access up to $7200 in FREE MONEY from the government, in the form of the CESG.
Yes, it sucks that the university wants their pound of flesh, but realistically it’s a tiny expense relative to the benefits of the RESP.
Read tomorrow then and see that there is another way of doing this.
Yup $12 ain’t much, but I have a PayPal account if you want to send me $12 right now too.
I’m not sure who you are bitter towards? The university has nothing to do with the RESP – why would they provide the letter for free?
You should talk to your provider – the verification of enrolment letter is a not a federal requirement as far as I know. If you argue enough they might relent and accept something else.
As for withdrawing contributions – you can do that anytime without documentation, but any grants attributed to those contributions will have to be returned to the government. So, obviously it’s much better to provide proof of enrolment.
Mike
Disagree, if the University is charging for a letter that they know needs to be given for RESP contributions (and their web site points this out), I view that as collusion with the Banks on this one (yes I am very paranoid, don’t point that out, it is evident).
I thought punch was “pleased” normally. Or is it bitter at your place?
I must take that creative writing course to get across the full bitterness of my feelings.
Hahah! That’s a great letter. It does seem JUST a little embellished.
Isn’t it better than nothing though? It IS after tax money but when the gov’t gives us a small miniscule hand-out, I’d take it!
I haven’t had to contribute to RESP’s yet, alas, because I have no children. I’ll let you know in a few years time what I think. 😉