What is the Canada Education Savings Grant (CESG) and how does it affect RESP?

• A. CESG is a loan program for education; increases debt load in RESP.
• B. CESG matches 50% of eligible contributions up to $5,000 per year per beneficiary.
• C. CESG matches 20% of eligible contributions up to $2,500 per year per beneficiary, up to a lifetime maximum of $7,200, boosting RESP growth.
• D. CESG is a grant paid only after the beneficiary completes education.

Answer: (C)

CESG is a government top-up to a registered education savings plan (RESP). It matches 20% of eligible contributions up to $2,500 per year for each beneficiary, with a lifetime maximum of $7,200. This means contributing $2,500 in a year adds $500 from the CESG to the RESP, while smaller contributions yield 20% of whatever you contribute. The grant adds to the savings available for post-secondary education and grows tax-sheltered inside the RESP. When funds are withdrawn for qualifying education, the CESG is part of the educational assistance payments and is taxed in the student’s hands. It’s not a loan, it doesn’t match contributions at 50%, and it isn’t paid only after education is completed.