Pros and cons of consolidating student loans
The enrolment fee may be refunded to you, in portion or in full, when your newborn enrols becomes a qualified student.
The longer you have been contributing to a plan, the more important it is that you continue to do so.For an overview of how a Group RESP plan works, you can refer to pages 25 to 32 of this prospectus. You should keep in mind that there is no such thing as a free lunch. In a typical plan, you’ll pay an enrolment fee of $200 per unit.Scholarship plans are heavily promoted at doctor’s offices throughout the country. If you enrol your newborn in a group plan, you are agreeing to invest $105 for each unit every year.The return you should expect from scholarship plans will be similar to what you can get from bonds (around 5% currently) plus the earnings on capital of members who dropped out less plan expenses.It is extremely difficult to say how much the fees add up to and since it is not obvious, you have to assume that you will be left with more if you invest on your own.The little I did read about them suggested that I should stay away.
Nothing that I learned while researching this post made me change my mind. In a Group RESP plan, contributions are pooled together and invested in fixed income instruments.
Repeat after me: NEVER CONSOLIDATE FEDERAL LOANS WITH PRIVATE LOANS!
If you read every article on this website, and you only learn one piece of information it should be to not consolidate your federal loans with your private loans.
First off, I would like to thank frequent commenter Mike for suggesting this topic.
Though I have set up a self-directed RESP for my boys, I had not researched scholarship plans in detail.
The primary reason is that no matter how good the rate or terms offered by a private loan consolidation, they almost never will be as good as those offered by a federal government consolidation.