What is the Lifelong Learning Plan?
The Lifelong Learning Plan (LLP) is a program by the Federal Government that lets you withdraw funds from your Retirement Savings Plan (RSP or RRSP), without paying any tax, in order to pay for the cost of full-time training or education for yourself or a spouse or common-law partner.
Note that you can't use withdrawals from the LLP to pay for training or education for your children or your spouse's or partner's children.
You may also want to consider the Canada Training Credit, a new refundable tax credit which can be used for eligible tuition and fees paid for courses taken in 2020 and beyond.
Who can participate in the LLP?
You can participate in the LLP if you meet all of the following four criteria:
- You have an existing RSP/RRSP.
- You're enrolled, or your spouse or common-law partner is enrolled, or you (or they) have an offer to enroll before March of the following year, as a full-time student (as determined by the educational institution), in a qualifying education program and at a designated education institution according to the Canada Revenue Agency (CRA).
- You're a Canadian resident.
- Your repayment period on an LLP withdrawal you may have made in a previous year hasn't begun.
How much can you withdraw?
You can withdraw up to $10,000 from your RSP/RRSP in a calendar year and up to $20,000 in total. You can use the funds towards tuition, books and other expenses, like rent – as long as you meet the four criteria above.
How does repayment work?
You have to repay the amounts withdrawn over a 10-year period.
To understand more about using the LLP, I interviewed Jeremy, a Contact Centre Manager who used the LLP when he went back to school.
Why did you use the LLP?
I went back to school to pursue a career in programming and expand my skillset. I completed the Computer Programmer Analyst program at George Brown College in Toronto. I decided to use the LLP because it was the best option for paying for school in my situation. I've had student loans in the past and didn't want to spend money on interest payments.
How did you use the LLP?
I withdrew the full $20,000: $10,000 for the first year and $10,000 for the second. The money first went to tuition, books and supplies. Anything leftover was put towards rent and other expenses.
Did you consider other sources of funds?
I initially looked into government student loans, since they would be interest free while I was in school, but I didn't qualify. I considered other loans but the interest rate was too high to make it worth it, versus taking the funds out of my RSP. The LLP was enough to cover my tuition, books, supplies and a portion of my rent and other expenses, but I still needed to work part time to cover rent and other bills.
How are you paying back the LLP?
I just finished school last year (2020), so my first repayment will be next year (2022). I'll be setting money aside in addition to my normal RSP contributions to make sure I have enough to designate as a repayment.
While it's possible to do monthly repayments to my RSP, I'm only required to do the one lump sum payment per year. This allows me greater flexibility than a monthly loan payment if I'm a little short one month. I also have the option of repaying more than the minimum without a penalty. It was also cheaper than my past student loans.