I Just Got Laid Off And Our Household Income Is Now Under $100K. How Do I Cover My Daughter's $33K Tuition Without Raiding My Retirement?

2025-11-23 02:03:39

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Losing a job can throw a wrench into anyone's financial plans. Here's a hypothetical, yet eminently relatable scenario that many Canadians may unfortunately face: Mark, 59, is excited that his daughter, Mary, recently entered her final year of her MBA. The fall semester was off to a great start, until Mark unexpectedly lost his job.

Before that, he was earning $100,000 a year. When combined with his wife Karen's salary of $95,000, their dual income created plenty of wiggle room for big expenses - including Mary's $33,000-a-year tuition (1). But with their household income now cut in half, Mark and his wife are now grappling with how to pay this bill.

Mark's first instinct is to dip into his retirement savings. But Karen isn't too sure about that idea and thinks they should take out a personal loan instead.

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With tuition due in full in a few short months, this family isn't sure of the next best move to cover their daughter's final year of college.

Navigating a finnicky job market

Mark had hoped to quickly find another job. But a quick assessment of the job market has dampened his hopes of securing a comparable position anytime soon. Although he's actively applying for work, he expects the process to take at least several months, if not more.

In Canada as of May 2025, the time an average job seeker searches for work has been increasing - 21.8 weeks on average, up from 18.4 weeks a year earlier, according to Statistics Canada (2). However, in June, more than 21.8% of unemployed Canadians had been searching for 27 weeks or more (3).

That said, with a softening labour market and falling job vacancies - 524,300 in Q1 2025, down 18.1% year-over-year - and despite this, total labour demand rose by 42,200. It's entirely possible that Mark could spend six months or longer on the job hunt before he reclaims a comparable income (4).

Read more: Here are 5 expenses that Canadians (almost) always overpay for - and very quickly regret. How many are hurting you?

Is raiding retirement savings a smart move?

With his income slashed, Mark and Karen should work with their daughter to update her student aid application, specific to their province or territory - for example, OSAP in Ontario. Before student aid programs release funding, they allow applicants to update their profiles and adjust household income estimates to reflect accurate earnings.

Another option is to contact the financial aid office at Mary's university to inform them of the change in family finances. Many institutions have procedures to reassess aid or grant appeals in cases of income fluctuations or loss.

Without Mark's salary, he and Karen could be in a relatively precarious financial situation. Let's say the household spends around $10,500 a month, and, since the job loss, their expenses have outpaced their income by about $3,000 every month, excluding tuition costs. If they had around $18,000 in emergency savings, that would give them six months of breathing room at their current spending levels to cover their costs until Mark gets another job.

Let's assume the couple has about $450,000 saved for retirement across their Registered Retirement Savings Plans (RRSPs). However, Mark has only just turned 59 and Karen is 56, meaning they wouldn't be able to tap into those funds without paying a withholding tax of anywhere between 10% and 30% for amounts of $5,000 to over $15,000 (5). Even if they did, making a withdrawal from their retirement account likely wouldn't be a good idea.

Most experts agree that raiding retirement funds should be avoided, particularly when savings aren't particularly high and there's little time left to make up for it.

Mark and Karen fall into this category. They are only a few years from the traditional retirement age of 65, and their retirement account balance is behind the median of $537,560 for savers in their age group (6). If they were to reduce their balance, it would increase the possibility of having to work many more years and potentially reduce their quality of life in retirement.

Since retirement savings are off the table, it's time to look at other options.

Working together to cover the costs

After speaking with the financial aid office at Mary's school, let's say the family receives a $11,000 grant to help cover some of the upcoming tuition bills. While they might be relieved to receive some assistance, that would still leave $22,000 to cover the fall and spring semesters.

Suppose the financial aid office also offered to help Mary secure a part-time job on-campus. She could make $18 an hour or somewhat less, depending on deductions, and could work 15 hours weekly with 30 weeks of work across the fall and spring semester to earn over $8,000. She could put that toward her living expenses, which would help ease another worry for her parents.

Mark and Karen could also withdraw funds from Mary's Registered Education Savings Plan (RESP), which is specifically designated for educational-assistance payments (EAPs) that can cover tuition costs. If they could take out $7,000, they could use it for the tuition bill, cutting it to $15,000.

From here, Mark and Karen have increasingly difficult choices to make. While they could drain their emergency savings to foot the bill, that would leave them in a vulnerable financial position.

Mark wants to use all of their emergency savings. But Karen isn't comfortable with that idea. In a compromise, they could put $3,000 of their emergency savings toward the tuition bill. Although that lowers their emergency fund to $15,000, they could trim their costs to make it stretch for as long as possible.

At this point, the family is out of ideas on how to pay the remaining tuition costs without taking on debt. While Mark and Karen don't want to turn to debt, there seems to be little choice. They could consider taking out a personal loan in their own names to pay for their daughter's remaining tuition costs. But after carefully exploring the costs, they may decide the best course of action would be for their daughter to tap into federal student loans instead.

As of April 1, 2023, the Government of Canada permanently eliminated interest on Canada Student Loans for eligible students, including loans currently in repayment (6). However, students are still responsible for paying any interest that may have accrued on their Canada loans before April 1, 2023.

Although it would take some creativity and perseverance, Mark, Karen and Mary would be able to finish paying for her college degree. At the graduation stage, they'd all breathe a big sigh of relief. And when Mark gets a new job, he could be in a position to help Mary pay off her student loan balance.