My partner is currently going to school with no income, and I have been working for a number of years with a reasonable income (enough for savings, RRSP (Registered Retirement Savings Plan) , trips etc.). We will be getting married this summer and as such she will no longer be eligible for student loans (as my income will be included as household income and push her well above the maximum threshold for student loan eligibility). As I see it there are a couple of options that could be undertaken. For the coming year the education fees will exceed the $10k maximum so I would likely look to withdraw the full amount eligible.
- Pay for her education in cash savings (currently in a high interest savings account - set aside for a rainy day fund. Once depleted I would begin building this up again, and if disaster struck I could withdraw from an investing account). Opportunity cost for this option is the loss of potential savings on 10k $60/year based on current interest rates in my savings account where it currently sits, but as I would then be refilling my savings account I think it is most appropriate to take the opportunity cost from having this invested ~5-10% return.
- Pay for schooling with a line of credit, in her name, which she is pre-approved for already but has not yet used as student loans don't accumulate interest until after schooling does whereas lines of credit do. The current rate for this is 3.95% and tracks against the prime lending rate, so could go up or down in time.
- Withdraw from my RRSP as a part of the LLP (Lifelong Learners Program. This withdraw is tax free but needs to be paid back within 10 years of school completion. With this option I would be losing out on potential earnings in my RRSP but this withdrawal would not be added to my income. My RRSP is quite conservatively held compared to my investment account so opportunity cost would be ~4-6%
At face value it seems to be obvious to use the line of credit, but I am curious if I am missing out on something as it seems like this situation was designed for the LLP.