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Sorry if this sounds silly.
We can access a government university loans where we have to pay back 125% of what we borrowed. Is this considered interest?
I.e. the amount we have to pay back is what we borrowed + 25%, so it is a fixed amount. Rather than say the loan growing every year or compounding.
Is this still considered interest?
Thank you.
It is not permissible.
It doesn't have to be compound interest to be considered ribaa.
The thing that makes this transaction impermissible is the fact that the quantities of money lent and returned differ.
It is permissible to sell an item on credit for a higher price than if it is paid for immediately, whether the payment is to be made in installments or in one payment at the later date.
But this is conditional upon the two parties not separating until they have agreed how the transaction is to be done, whether it is to be paid immediately or deferred. In this case the additional amount is not riba, and there is nothing in sharee’ah to specify the amount of the extra payment in the case of deferred payment.
But the Messenger of Allaah (peace and blessings of Allaah be upon him) encouraged tolerance in matters of selling, buying, paying off debts and asking others to pay debts.(Fataawa Islaamiyyah, part 2, p. 335)
