Kids aren’t the only ones going back to school this fall; adults pursuing graduate school are also hitting the books. While the two most common reasons for going back to school are professional development or switching careers, a second lap through the classroom comes with extra financial challenges. For example, post-grad students often take night school on top of working their existing jobs. They’re also a consumer segment with greater debt obligations, family and mortgage commitments that usually don’t impact younger students.
Costs Are Rising for Post Grads
Attending university isn’t any less expensive the second time around, and tuition costs across Canada are rising. Statistics Canada reports students enrolled in graduate programs in Canada paid an average of about $6,210 in tuition fees for the 2014/2015 school year. Tuition fees have increased from last year in nine out of 10 provinces.
For example, pursuing the popular executive master of business administration program will cost you about$39,862 in tuition. That doesn’t include books, meals, and other expenses – not to mention the potential earnings cut you’ll take.
Also read: Are Canadian Students in Debt Denial?>
Financial Aid for Post Grads
How can adults manage the financial cost of returning to school? What steps should they take before hitting campus?
“There are a couple (of things to consider) and they depend on your particular situation,” says Myron Knodel, director of Tax and Estate Planning from Investors Group. “Trying to determine the resources, you could look to the income of your spouse or the income you may be able to earn in the off season of school or a part-time basis, loans or gifts from other family members.”
Knodel adds post grads are still eligible for Canada student loan grants, which are available based on financial need. “The nice thing about the student loan is interest doesn’t begin until six months after you complete your program. When you do pay interest, you get a tax credit for amount of interest you pay. The grant program is free money and does not need to be repaid.”
Your RRSP Options
Another route is to dip into that retirement nest egg. Knodel suggests pulling a withdrawal from RRSPs, either directly, or via the federal Lifelong Learning Plan. “With your RRSP, you could make a straight withdrawal. The amount of tax may be minimal or none at all,” he says. “The other alternative, would be to obtain a loan under the Lifelong Learning Plan. You can obtain up to $20,000. The most you can withdraw in any one year is $10,000.”
Similar to the RRSP Home Buyer’s Plan, there is a 10-year requirement to pay back the retirement funds over time, though repayment doesn’t need to start until the fifth year after withdrawal. “If you fail to repay, the RRSP withdrawal amount is included in your income that year,” Knodel adds.
Tax-Free Tuition Funds
Students can also use RESPs to give up to $50,000 of their school savings tax-sheltered status. “As long as the money is in the RESP, any income earned in it is not taxed,” says Knodel, adding that it is taxed only when you make withdrawals when going to school. He also suggests TFSAs as an effective savings vehicle, as contribution room is restored each year.
Plan Your Payments
The bottom line – going back to school requires significant financial planning, from funding tution to the temporary impact it will have on your lifestyle and current income.
“It requires a formal type of budget,” says Knodel. “Analyze your current financial resources and make up the shortfall. Vacations that you plan may have to be postponed, and you may need to downsize your lifestyle. It’s a commitment that all family members need to be on board.”