In terms of RESPs, an educational assistance payment (EAP) helps the beneficiary finance the expenses of his or her post-secondary education. EAPs consist of various grants and funds, including the Canada Learning Bond, the Canada education savings grant, and any form of earnings obtained from the savings program providing by heritage education funds.
A student may receive EAPs if:
• He or she is enrolled in a qualifying educational program.
• He or she is already 16 years old and is attending a specified educational program.
• He or she is attending a post-secondary educational institution.
A qualifying educational program is post-secondary school program that lasts for not less than 3 consecutive weeks. This program usually requires students to spend at least 10 hours per week on a course or work in the program.
Meanwhile, specified educational program is a post-secondary program that lasts for at least3 consecutive weeks and that requires a student to spend at least 12 hours per month on the courses in the program.
A post-secondary institution includes:
• Any educational institution that offers non-credit courses that develop or improve skills in occupation; and that’s certified by Employment and Social Development Canada (ESDC).
• A university, college, or other such institutions in Canada.
• A cross-border or overseas university that has post-secondary school courses at which the student is enrolled in course not shorter than 13 consecutive weeks.
• A university outside Canada that has courses at post-secondary level where the student is enrolled full-time in a course not shorter than 3 consecutive weeks.
In case he or she stopped attending school, the student may still be entitled to EAPS as long as the payments would have been considered as EAPs if they had been made quickly before the student stopped school.
Maximum amounts of Education Assistant Payments
After the student enrolled in a qualifying educational program, he or she can start receiving EAPs. However, he or she must also other important requirements.
• For the first 13 consecutive weeks of an RESP for a student in a qualifying educational program, the maximum amount of EAP to be made is $5,000. After the initial 13 weeks, there’s no longer any limit on the amount of EAPs, provided the student continues to be qualified for such benefits.
• On the other hand, if within a 12-month period the student is not enrolled for any qualifying educational program for 13 consecutive weeks, the $5,000-limit will be imposed again.
• Meanwhile, for specified educational programs, the cap is at $2,500 for the 13-week period, regardless of the student’s enrollment in a program.
• As far as the terms and conditions of an RESP, the promoter can supplement the $5,000 or $2,500 EAP by paying a part of the contribution tax-free to the student.
Tax Considerations
Whenever EAPs are paid to the student, they become subject to taxes since they come from tax-sheltered funds such as grants, investment incomes, and the likes. Your RESP provider will most likely give you a T4A slip, which they use to report the payments on your income tax return.