What is Lifelong Learning Plan?

The Lifelong Learning Plan (LLP) allows you to withdraw up to $10,000 in a calendar year from your RRSPs to finance full-time training or education for you or your spouse or common-law partner. This is an excellent program for someone looking to attend post-secondary to improve or enhance their skill sets and has the fund available to finance their studies within their RRSP. The maximum amount that can be withdrawn while in the program is $20,000, and you cannot withdraw funds from a Specified Pension Plan (SPP), Pooled registered pension plan (PRPP), or locked-in RRSPs that may not allow withdrawals.

How to Qualify for Lifelong Learning Plan?

Two critical conditions must first be met to participate in the Lifelong Learning Plan. You must;

• Be a resident of Canada
• Have an RRSP account

Once you’ve met those conditions, you have to ensure you meet the requirements to be a student in the program. A student can be you or your spouse or common-law partner. It’s important to note that this program isn’t meant to be used to assist your child or the child of your spouse or common-law partner; therefore, they cannot be named Lifelong Learning students. Individuals must meet the following requirements to be considered a student in the program;

• Be a full-time student at the educational institution
• Enrolled in a qualifying educational program
• Enrolled at a designated educational institution

If a student is only enrolled part-time, they cannot participate in the LLP unless the student has a disability. To qualify for disability, the student must have a mental or physical impairment that prevents them from enrolling full-time. A student may also be accepted for part-time enrollment if they are currently receiving disability income, which will have to be confirmed by their income tax and benefit return.

According to the program guidelines, full-time status is left to the educational institution to determine. Therefore, you must ensure that the institution you are applying to and the courses you undertakes meets their requirement to be considered a full-time student. If not, the LLP program will not consider you full-time, and you will not be able to participate in the program.

How to withdraw money from the Lifelong Learning Plan

If you qualify for the LLP program, you can request to withdraw the funds from your RRSP using form RC96, Lifelong Learning Plan (LLP). Contributions within your RRSP need to have been there for at least 90 days, which means you can’t simply open an RRSP account and deposit the funds to reduce your income and then enter the LLP program right away. Funds have to be in the RRSP account for at least 90 days, and there is no withholding tax on funds pulled out for the LLP program.

Additionally, withdrawals made for the LLP program will not prevent you from being able to make RRSP contributions or deduct those contributions against your taxable income.

How to repay the Lifelong Learning Plan

You have ten years to repay the amount withdrawn from the LLP program. If funds have not been fully paid back, they will be added to the individual income for the withdrawn year.

Once the full payment is made, you can re-apply again. There is no limit to the number of times you can participate in the LLP program as long as each amount has been repaid before starting the new application.

What Schools and Programs Qualify for Lifelong Learning Plan?

LLP school qualifications are broken into two categories; educational program and educational institution. An educational program is a course or program offered by a university, college, or educational institution certified by Employment and Social Development Canada (ESDC). For the program to qualify for the LLP program, it has to be at three months or more and requires students to spend 10 hours or more per week on the course work. An educational institution is a university or college where you would enroll full-time.

Are there any disadvantages to using the Lifelong Learning Plan?

While there are many benefits to using the LLP program to fund your educational studies, there are drawbacks. The biggest one is the opportunity cost of the funds withdrawn. As a result of using your RRSP, those funds cannot grow further. Therefore, you lose out on the potential growth of those funds.

However, this needs to be balanced with the potential savings you may have in interest cost savings. Additionally, improving your skills might further increase your income savings ability in the future.

Why You Should Use the Lifelong Learning Plan

What makes the Lifelong Learning Plan great is the flexibility it offers. For example,  you can participate in the Home Buyers’ Plan (HBP) even if you haven’t paid back your LLP amount. Additionally, the program doesn’t require you to use the funds exclusively for the educational program. If you’ve met the program requirement, the funds may be used for any purposes once withdrawan.

The best type of borrowing is when you set the terms while ensuring you pay back the money. You should consider the lifelong learning program to fund your educational studies. Using the lifelong learning program allows you to access your existing funds within your RRSP to support your academic studies. You become your lender, which saves you interest costs, increases your earning potential and ensures you pay back the fund borrowed in a reasonable time frame.