Help Pay for Your Education with the Lifelong Learning Plan (LLP)

College costs continue to rise. The cost of a good education is higher than ever, and in many cases you feel as though you have pay that cost in order to compete for the best jobs.

If you are at a loss at what you can do to cover the increasing costs of a good education, the government has an idea: The Lifelong Learning Plan.

What is the Life Long Learning Plan?

The Lifelong Learning Plan (LLP) is a government program that allows you to withdraw money from your RRSPs for education without any tax being withheld. The good news is that this money doesn’t have to be used by you. Your LLP withdrawal can be for you, or your spouse or common-law partner. To qualify for this, you must be enrolled as a full-time student in a educational program at a designated educational institution.

You can withdraw up to $20,000 under this plan with a maximum of $10,000 per year. There is no lifetime maximum, you can start a new plan once the previous plan has been paid back and is at a zero balance. Under this plan, you cannot withdraw money that has been contributed within the past 89 days. So, while there are restrictions, the reality is that you still have the option to use the money in your RRSP tax free to help fund an education.

Another great thing about the Lifelong Learning Plan is that it is not limited to the amount of your tuition and school expenses. You can use the money for any qualified expense associated with your educational pursuits. Because this may leave money available to cover living expenses, the LLP might be a great way to return to full time school, since you don’t have to try to work part time while attending school part time.

Repaying Your LLP Money

It’s important to understand that the money you take from your RRSP in the name of education is a loan. You are borrowing from yourself, but it is still a loan. You need to repay your RRSP, or face the tax consequences, which can be quite hefty if you aren’t careful.

Repayment of your LLP begins after whichever comes first: either when you are not entitled to the education amount on your tax return for two consecutive years or in the 5th year from when the plan started. Once repayment begins, you must repay at least 10% a year over ten years. You won’t get a tax refund on this repayment since you received a refund when it was originally contributed.

It’s important to keep good records in these cases so that you can properly fill out your tax form when the time comes. It’s also important to understand the opportunity cost that come with withdrawing money from your RRSP. While you can use the money for your LLP and education, you won’t be earning a return on it during the time that it is being used for your education. You’ll have to decide if that’s worth it for you.