What happens if RESP beneficiaries do not attend qualified post-secondary institutions?

When a Registered Education Savings Plan (RESP) beneficiary does not attend a qualified post-secondary institution, the consequences for the funds in the account can be significant. The correct understanding is that the accumulated grants and any income generated in the RESP may need to be returned to the government if the beneficiaries do not utilize the funds for their intended educational purpose.

Specifically, if the beneficiary does not enroll in a qualifying educational program, the government grants that were added to the RESP will usually be returned, often requiring the subscriber or account holder to pay back those amounts. This is because the purpose of the RESP is to encourage savings for post-secondary education, and the government grants are contingent upon the beneficiary's attendance at an eligible institution.

In contrast, it is also possible to avoid losing all benefits from the RESP. The funds contributed by the account holder (the subscriber) can remain in the plan, and there are options for the funds, such as transferring them to another sibling's RESP or potentially rolling over contributions into a Registered Retirement Savings Plan (RRSP) under specific circumstances, but these options depend on the specific situation and regulations in place.

In summary, while the contributions can potentially be preserved or redirected under certain conditions, the obligation to return government contributions arises if the