Back to School: How Parents Can Prepare for the Cost of Post-Secondary
A practical guide for Canadian and U.S. families, whether university is a decade away or eleven months away. Educational only; not investment, tax, or religious advice.
September has a particular rhythm to it. Supply lists, new shoes, the first pickup line of the year. And somewhere in the middle of it, usually while writing a cheque for something, a thought that arrives uninvited: this is the cheap part.
It is. The expensive part is post-secondary, and it tends to be handled the way most large expenses are handled, with a vague intention to deal with it later. For Muslim families there's an added layer, because the default machinery of education saving in North America runs on interest, and the default answer to a shortfall is a loan that charges it.
This article covers what the costs actually look like, what the government-registered education accounts in Canada and the U.S. do and don't do, the specific compliance questions those accounts raise, and what the options are if the first tuition bill arrives before the savings do.
First, the number you're actually planning for
Tuition is the figure everyone quotes, and it's the smaller half of the problem.
In Canada, Statistics Canada reported average undergraduate tuition for Canadian students at $7,734 for 2025/2026, up 1.4% from the prior year. Graduate tuition averaged $7,978. The spread by province is wide: Newfoundland and Labrador ($3,746) and Quebec ($3,963) at the low end, with New Brunswick, Saskatchewan and Nova Scotia approaching $10,000. (StatCan typically releases the following academic year's figures in early September, so newer numbers may now be available.)
In the U.S., published tuition varies so dramatically between in-state public, out-of-state public and private institutions that an average is close to meaningless for planning. The relevant number is the specific institution's total cost of attendance, which schools are required to publish.
In both countries, the same trap applies: tuition is often less than half of what a year away from home actually costs. Residence and meal plans, or rent and groceries. Books and course materials. Transit or a car. A laptop that dies in second year. Flights home. Add those and the annual figure can double.
The practical starting point is not "how much is tuition" but "what does one year, all in, at the kind of school my child is likely to attend, actually cost, and how many of those years am I funding?"
Track one: University is still years away
If your child is in elementary or middle school, you have the one advantage that can't be bought later, which is time.
The account is a wrapper, not an investment
This is the single most important thing to understand, and it's where most well-intentioned education saving goes sideways for Muslim families.
An RESP in Canada, or a 529 plan in the U.S., is a container. It defines the tax treatment, the government benefits, and the rules for getting money out. It says almost nothing about what's held inside.
What's held inside is a separate decision, and it's the decision that determines whether the savings are Shariah-compliant. A registered education account holding a conventional bond fund is holding a conventional bond fund. The wrapper doesn't change the nature of the underlying asset.
The glide path problem
Here's the specific mechanism worth knowing about, because it operates automatically and quietly.
Most education savings plans offer an age-based or target-date option, often as the default. These are designed to reduce risk as the child approaches enrolment, which in practice means shifting the portfolio steadily out of equities and into fixed income. By the time the child is 16 or 17, a conventional age-based portfolio may be heavily weighted toward bonds, GICs, or money market instruments.
Every one of those is an interest-bearing instrument.
Which means a Muslim parent can select a compliant equity option when their child is six, never touch the account again, and find that the plan has moved the money into precisely what they were trying to avoid, not through any error, but by design. The de-risking that makes conventional sense is exactly what creates the problem.
If you hold an education account, it's worth checking what it's actually invested in today, and whether an automatic glide path is running in the background.
What the government adds, and how that's generally treated
In Canada, the Canada Education Savings Grant pays 20% on the first $2,500 contributed each year, up to $500 annually, to a lifetime maximum of $7,200 per child. Families with adjusted net income below $58,523 may receive an additional 10% or 20% on the first $500 contributed. Unused grant room carries forward, and catch-up contributions can draw up to $1,000 of CESG in a single year. Eligibility generally runs until the end of the calendar year the child turns 17, with stricter conditions at 16 and 17.
The RESP itself has a $50,000 lifetime contribution limit per beneficiary, no annual cap, contributions permitted for up to 31 years, and the plan must close by year 35. Contributions come back out tax-free; growth and grants are paid out as Educational Assistance Payments and are taxable in the student's hands.
In the U.S., 529 plans have no federal contribution limit, but contributions are gifts for tax purposes, the 2026 annual exclusion is $19,000 per donor per beneficiary ($38,000 for a married couple filing jointly), and five-year gift-tax averaging allows up to $95,000 in one year. State-level aggregate balance caps apply and vary. Unused funds can be rolled to a Roth IRA in the beneficiary's name up to a $35,000 lifetime limit, subject to a 15-year account-age requirement, a five-year seasoning rule on the contributions being moved, and an annual cap tied to the Roth contribution limit.
On the compliance side: a government grant is generally understood as a gift or transfer rather than as a return on lent money, which places it in a different category from interest. Scholars' treatment of these programs varies, and this is a question to put to a qualified scholar rather than to settle from an article.
The habit matters more than the amount
The parent who contributes modestly and consistently from year one, into compliant holdings, ends up in a materially different position than the parent who intends to make a large contribution "once things settle down." Not because of any clever strategy, just because contributions made earlier have more years behind them.
If the amount you can start with feels too small to matter, start with it anyway. The alternative isn't a bigger contribution later; it's usually no contribution at all.
Track two: tuition arrives next year
If your child is in grade 11 or 12, the planning question changes shape entirely. Compounding isn't going to help you. What helps is knowing your real number and knowing which levers you have.
Step one: get the actual gap on paper
Take the total annual cost, tuition, housing, food, books, transport, everything: for the two or three schools genuinely in play. Multiply by the number of years. Subtract what's saved, what your child can realistically contribute from work, and any scholarships or grants already confirmed.
The number that remains is the gap. It's usually uncomfortable, and it's much easier to work with than an unexamined worry.
Step two: understand the loan question, because the answer differs by country
This is where Canadian and American families face genuinely different situations.
In Canada, the Government of Canada permanently eliminated the accumulation of interest on all Canada Student Loans effective April 1, 2023, including loans already in repayment. Some provinces have done the same on their portion, New Brunswick eliminated interest on its portion in November 2022, while others have not. So a Canadian student loan is typically a federal portion that accrues no interest, and possibly a provincial or territorial portion that may.
That distinction matters. A loan that accrues no interest doesn't raise the riba concern that an interest-bearing loan does. Whether to borrow at all, how to treat a provincial portion that does charge interest, and how to handle any fees are questions for a qualified scholar, but it's worth knowing that the federal portion is not the instrument many families assume it is.
In the U.S., the situation is the opposite. Federal Direct Loans first disbursed between July 1, 2026 and June 30, 2027 carry fixed rates of 6.52% for undergraduates, 8.07% for graduate and professional students, and 9.07% for Direct PLUS loans taken by parents or graduate students. These are interest-bearing by design.
For an American Muslim family, that means the conventional funding path leads directly into riba, and the planning has to work harder to avoid it. It also means Parent PLUS borrowing, often presented as the natural solution when savings fall short, is the most expensive of the three and carries the same structural problem.
Step three: the levers that don't involve borrowing
Most of these are unglamorous. They also work.
Live at home and commute. Residence and meal plans are frequently the largest single line after tuition. Removing them can change the annual figure more than any other decision.
Start at a lower-cost institution and transfer. Community college in the U.S., or a college-to-university pathway in Canada, with credits transferring into the degree.
Choose in-province or in-state. The tuition differential is often substantial, and in Canada the provincial spread is wide enough to matter.
Co-op and paid internship programs. Longer to complete, but the student earns through the degree rather than borrowing against it.
Scholarships, bursaries and grants. These are awards, not loans, no repayment and no interest. They're also chronically under-applied for, particularly smaller community, association and faculty-specific awards. Treat the application process as a paid part-time job in grade 12.
Part-time work during the school year, in the amount that doesn't damage the grades that qualify for the scholarships.
Qard hasan within the family. An interest-free loan from a parent, grandparent, uncle or aunt is a well-established form of mutual support. Where families are willing, writing down the amount and the repayment expectation avoids the misunderstandings that strain relationships later.
Paying from cash flow as you go. Many families fund a meaningful share of each year out of current income rather than from savings. It's not elegant, but it's riba-free and it's what a lot of households actually do.
Step four: don't solve it by borrowing against the house
When a shortfall appears, the conventional advice is often to draw on home equity. For families avoiding interest-based credit that isn't available, which removes a lever most planning assumes and that's better discovered now than in August of first year.
The compliance questions specific to education savings
A few questions come up repeatedly and deserve to be named plainly:
Is the account itself permissible? RESPs and 529 plans are account structures with tax rules attached. The question generally attaches to what's held inside them, not to the wrapper.
What about government grants? A grant is generally understood as a transfer or gift rather than a return on money lent. Scholars' treatment varies and the question belongs with a qualified scholar.
What about interest earned on the cash balance? Most accounts sweep uninvested cash into an interest-bearing balance. Scholarly bodies generally direct that impermissible income be given away in charity without expectation of reward, and many funds publish a purification figure. The method differs by authority.
Are group scholarship plans a problem? Group or "scholarship trust" plans in Canada typically invest heavily in fixed income by mandate. If you hold one, the underlying holdings are worth examining rather than assuming.
Is zakat due on education savings? Money set aside for a future expense is generally still wealth held today. In Canada, RESP contributions remain the subscriber's property, which raises the question of whose wealth it is for zakat purposes. Views differ; ask a qualified scholar and get an answer you can apply annually rather than re-litigating each Ramadan.
The conversation most families skip
At some point the numbers need to be discussed with the person they're about to be spent on.
Not as a burden transferred, but as information shared. A seventeen-year-old choosing between an out-of-province school with residence and a local school they can commute to is making a five- or six-figure decision, often without being told that's what it is. And a student who understands that the family is funding education without interest-based debt, and what that requires- tends to make different choices about the meal plan, the apartment and the summer job.
That conversation is also where a set of values gets transmitted rather than just enforced. Which is arguably the more durable thing you're passing on.
Important disclosures
This article is for informational and educational purposes only. It does not constitute investment, financial, legal, tax or religious advice, is not a recommendation regarding any account type, security or program, and does not take into account any individual's circumstances, objectives or risk tolerance.
Manzil does not provide tax or legal advice. Program rules, contribution limits, grant amounts, interest rates and tuition figures change and vary by jurisdiction and by institution; readers should verify current details with the relevant government agency, plan provider or institution, and consult a qualified tax professional regarding their own situation.
Descriptions of Shariah-related considerations are general summaries of published positions of scholarly bodies as of the date of publication. Islamic scholars differ on a number of the questions raised here, including the treatment of government education grants, purification of incidental interest, and zakat on education savings. Nothing in this article is a fatwa or a determination of permissibility for any individual, product or program. Readers should consult a qualified scholar.
Figures cited are drawn from publicly available government and third-party sources as of the dates indicated and have not been independently verified. Investing involves risk, including possible loss of principal. Shariah screening reduces the investable universe and may cause a portfolio to perform differently from unscreened benchmarks.
Sources
A practical guide for Canadian and U.S. families, whether university is a decade away or eleven months away. Educational only; not investment, tax, or religious advice.
September has a particular rhythm to it. Supply lists, new shoes, the first pickup line of the year. And somewhere in the middle of it, usually while writing a cheque for something, a thought that arrives uninvited: this is the cheap part.
It is. The expensive part is post-secondary, and it tends to be handled the way most large expenses are handled, with a vague intention to deal with it later. For Muslim families there's an added layer, because the default machinery of education saving in North America runs on interest, and the default answer to a shortfall is a loan that charges it.
This article covers what the costs actually look like, what the government-registered education accounts in Canada and the U.S. do and don't do, the specific compliance questions those accounts raise, and what the options are if the first tuition bill arrives before the savings do.
First, the number you're actually planning for
Tuition is the figure everyone quotes, and it's the smaller half of the problem.
In Canada, Statistics Canada reported average undergraduate tuition for Canadian students at $7,734 for 2025/2026, up 1.4% from the prior year. Graduate tuition averaged $7,978. The spread by province is wide: Newfoundland and Labrador ($3,746) and Quebec ($3,963) at the low end, with New Brunswick, Saskatchewan and Nova Scotia approaching $10,000. (StatCan typically releases the following academic year's figures in early September, so newer numbers may now be available.)
In the U.S., published tuition varies so dramatically between in-state public, out-of-state public and private institutions that an average is close to meaningless for planning. The relevant number is the specific institution's total cost of attendance, which schools are required to publish.
In both countries, the same trap applies: tuition is often less than half of what a year away from home actually costs. Residence and meal plans, or rent and groceries. Books and course materials. Transit or a car. A laptop that dies in second year. Flights home. Add those and the annual figure can double.
The practical starting point is not "how much is tuition" but "what does one year, all in, at the kind of school my child is likely to attend, actually cost, and how many of those years am I funding?"
Track one: University is still years away
If your child is in elementary or middle school, you have the one advantage that can't be bought later, which is time.
The account is a wrapper, not an investment
This is the single most important thing to understand, and it's where most well-intentioned education saving goes sideways for Muslim families.
An RESP in Canada, or a 529 plan in the U.S., is a container. It defines the tax treatment, the government benefits, and the rules for getting money out. It says almost nothing about what's held inside.
What's held inside is a separate decision, and it's the decision that determines whether the savings are Shariah-compliant. A registered education account holding a conventional bond fund is holding a conventional bond fund. The wrapper doesn't change the nature of the underlying asset.
The glide path problem
Here's the specific mechanism worth knowing about, because it operates automatically and quietly.
Most education savings plans offer an age-based or target-date option, often as the default. These are designed to reduce risk as the child approaches enrolment, which in practice means shifting the portfolio steadily out of equities and into fixed income. By the time the child is 16 or 17, a conventional age-based portfolio may be heavily weighted toward bonds, GICs, or money market instruments.
Every one of those is an interest-bearing instrument.
Which means a Muslim parent can select a compliant equity option when their child is six, never touch the account again, and find that the plan has moved the money into precisely what they were trying to avoid, not through any error, but by design. The de-risking that makes conventional sense is exactly what creates the problem.
If you hold an education account, it's worth checking what it's actually invested in today, and whether an automatic glide path is running in the background.
What the government adds, and how that's generally treated
In Canada, the Canada Education Savings Grant pays 20% on the first $2,500 contributed each year, up to $500 annually, to a lifetime maximum of $7,200 per child. Families with adjusted net income below $58,523 may receive an additional 10% or 20% on the first $500 contributed. Unused grant room carries forward, and catch-up contributions can draw up to $1,000 of CESG in a single year. Eligibility generally runs until the end of the calendar year the child turns 17, with stricter conditions at 16 and 17.
The RESP itself has a $50,000 lifetime contribution limit per beneficiary, no annual cap, contributions permitted for up to 31 years, and the plan must close by year 35. Contributions come back out tax-free; growth and grants are paid out as Educational Assistance Payments and are taxable in the student's hands.
In the U.S., 529 plans have no federal contribution limit, but contributions are gifts for tax purposes, the 2026 annual exclusion is $19,000 per donor per beneficiary ($38,000 for a married couple filing jointly), and five-year gift-tax averaging allows up to $95,000 in one year. State-level aggregate balance caps apply and vary. Unused funds can be rolled to a Roth IRA in the beneficiary's name up to a $35,000 lifetime limit, subject to a 15-year account-age requirement, a five-year seasoning rule on the contributions being moved, and an annual cap tied to the Roth contribution limit.
On the compliance side: a government grant is generally understood as a gift or transfer rather than as a return on lent money, which places it in a different category from interest. Scholars' treatment of these programs varies, and this is a question to put to a qualified scholar rather than to settle from an article.
The habit matters more than the amount
The parent who contributes modestly and consistently from year one, into compliant holdings, ends up in a materially different position than the parent who intends to make a large contribution "once things settle down." Not because of any clever strategy, just because contributions made earlier have more years behind them.
If the amount you can start with feels too small to matter, start with it anyway. The alternative isn't a bigger contribution later; it's usually no contribution at all.
Track two: tuition arrives next year
If your child is in grade 11 or 12, the planning question changes shape entirely. Compounding isn't going to help you. What helps is knowing your real number and knowing which levers you have.
Step one: get the actual gap on paper
Take the total annual cost, tuition, housing, food, books, transport, everything: for the two or three schools genuinely in play. Multiply by the number of years. Subtract what's saved, what your child can realistically contribute from work, and any scholarships or grants already confirmed.
The number that remains is the gap. It's usually uncomfortable, and it's much easier to work with than an unexamined worry.
Step two: understand the loan question, because the answer differs by country
This is where Canadian and American families face genuinely different situations.
In Canada, the Government of Canada permanently eliminated the accumulation of interest on all Canada Student Loans effective April 1, 2023, including loans already in repayment. Some provinces have done the same on their portion, New Brunswick eliminated interest on its portion in November 2022, while others have not. So a Canadian student loan is typically a federal portion that accrues no interest, and possibly a provincial or territorial portion that may.
That distinction matters. A loan that accrues no interest doesn't raise the riba concern that an interest-bearing loan does. Whether to borrow at all, how to treat a provincial portion that does charge interest, and how to handle any fees are questions for a qualified scholar, but it's worth knowing that the federal portion is not the instrument many families assume it is.
In the U.S., the situation is the opposite. Federal Direct Loans first disbursed between July 1, 2026 and June 30, 2027 carry fixed rates of 6.52% for undergraduates, 8.07% for graduate and professional students, and 9.07% for Direct PLUS loans taken by parents or graduate students. These are interest-bearing by design.
For an American Muslim family, that means the conventional funding path leads directly into riba, and the planning has to work harder to avoid it. It also means Parent PLUS borrowing, often presented as the natural solution when savings fall short, is the most expensive of the three and carries the same structural problem.
Step three: the levers that don't involve borrowing
Most of these are unglamorous. They also work.
Live at home and commute. Residence and meal plans are frequently the largest single line after tuition. Removing them can change the annual figure more than any other decision.
Start at a lower-cost institution and transfer. Community college in the U.S., or a college-to-university pathway in Canada, with credits transferring into the degree.
Choose in-province or in-state. The tuition differential is often substantial, and in Canada the provincial spread is wide enough to matter.
Co-op and paid internship programs. Longer to complete, but the student earns through the degree rather than borrowing against it.
Scholarships, bursaries and grants. These are awards, not loans, no repayment and no interest. They're also chronically under-applied for, particularly smaller community, association and faculty-specific awards. Treat the application process as a paid part-time job in grade 12.
Part-time work during the school year, in the amount that doesn't damage the grades that qualify for the scholarships.
Qard hasan within the family. An interest-free loan from a parent, grandparent, uncle or aunt is a well-established form of mutual support. Where families are willing, writing down the amount and the repayment expectation avoids the misunderstandings that strain relationships later.
Paying from cash flow as you go. Many families fund a meaningful share of each year out of current income rather than from savings. It's not elegant, but it's riba-free and it's what a lot of households actually do.
Step four: don't solve it by borrowing against the house
When a shortfall appears, the conventional advice is often to draw on home equity. For families avoiding interest-based credit that isn't available, which removes a lever most planning assumes and that's better discovered now than in August of first year.
The compliance questions specific to education savings
A few questions come up repeatedly and deserve to be named plainly:
Is the account itself permissible? RESPs and 529 plans are account structures with tax rules attached. The question generally attaches to what's held inside them, not to the wrapper.
What about government grants? A grant is generally understood as a transfer or gift rather than a return on money lent. Scholars' treatment varies and the question belongs with a qualified scholar.
What about interest earned on the cash balance? Most accounts sweep uninvested cash into an interest-bearing balance. Scholarly bodies generally direct that impermissible income be given away in charity without expectation of reward, and many funds publish a purification figure. The method differs by authority.
Are group scholarship plans a problem? Group or "scholarship trust" plans in Canada typically invest heavily in fixed income by mandate. If you hold one, the underlying holdings are worth examining rather than assuming.
Is zakat due on education savings? Money set aside for a future expense is generally still wealth held today. In Canada, RESP contributions remain the subscriber's property, which raises the question of whose wealth it is for zakat purposes. Views differ; ask a qualified scholar and get an answer you can apply annually rather than re-litigating each Ramadan.
The conversation most families skip
At some point the numbers need to be discussed with the person they're about to be spent on.
Not as a burden transferred, but as information shared. A seventeen-year-old choosing between an out-of-province school with residence and a local school they can commute to is making a five- or six-figure decision, often without being told that's what it is. And a student who understands that the family is funding education without interest-based debt, and what that requires- tends to make different choices about the meal plan, the apartment and the summer job.
That conversation is also where a set of values gets transmitted rather than just enforced. Which is arguably the more durable thing you're passing on.
Important disclosures
This article is for informational and educational purposes only. It does not constitute investment, financial, legal, tax or religious advice, is not a recommendation regarding any account type, security or program, and does not take into account any individual's circumstances, objectives or risk tolerance.
Manzil does not provide tax or legal advice. Program rules, contribution limits, grant amounts, interest rates and tuition figures change and vary by jurisdiction and by institution; readers should verify current details with the relevant government agency, plan provider or institution, and consult a qualified tax professional regarding their own situation.
Descriptions of Shariah-related considerations are general summaries of published positions of scholarly bodies as of the date of publication. Islamic scholars differ on a number of the questions raised here, including the treatment of government education grants, purification of incidental interest, and zakat on education savings. Nothing in this article is a fatwa or a determination of permissibility for any individual, product or program. Readers should consult a qualified scholar.
Figures cited are drawn from publicly available government and third-party sources as of the dates indicated and have not been independently verified. Investing involves risk, including possible loss of principal. Shariah screening reduces the investable universe and may cause a portfolio to perform differently from unscreened benchmarks.
Sources
