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Muslim students tend to take a student finance loan in order to go through university without financial strain, but I've recently discovered there is interest involved.

According to my friend, some Imams say it is okay for education's sake. I have just read this fatwa on Islam21C, which seems sound. Is there anything wrong with the fatwa? Please respond to with your reservations.

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Assalamu alaikum,

a) There is one type of student loan where you can pay back within a certain period, without giving any interest. This is halal if all are paid-back without any extra money (interest).

b) If the student loan is not as above, and payback involves paying interest, then this is usury (riba), so the original/default ruling for this that it is haram and a major sin. But if there is a necessity, then only one can take an interest-based loan.

Now the issue is: what is 'necessity'?

Based on requirement, a matter can fall in one of 3 categories as per usul-l-fiqh.

  • necessity (darurat): this means without which you can't live, like - food, clothes.
  • need (hajat): this means you can live without this, but without this, you will have inconveniences.
  • beautification (tahsiniyat): this only beautifies life. there is no need or necessity of this.

Example of 'necessity' is that if you are dying of starvation and you only find pork to eat, then pork become halal at that time.

Example of 'need' is - you need a car to go to work in the USA if buses are very few and infrequent. So this need makes car insurance (the minimum that is required by law) halal.

Example of 'beautification' is that you buy a luxury car instead of a regular car.

--the above has just set the stage for understanding ---

Now the student loan. Is it 'necessity' or 'need'? The vast majority of scholars will not put this in 'necessity' bucket. Maybe a 'need' on a case-by-case basis.

Now, what type of sin is usury (riba)? This is a major sin.

A major sin can't flip a 'need' from haram to halal.

So by default, this riba will earn him a major sin. But if your case is special and you think higher education is a 'necessity' for you, then talk to a scholar or a knowledgeable imam.

Otherwise, it is a sin.

Hope this helps, in sha' Allah.

  • please see this also: amjaonline.org/fatwa-22976/info – Kazi Nasrat Ali Mar 24 '18 at 7:23
  • Thanks for the answer. In the fatwa I posted above this is mentioned as a scholarly consensus in the UK. "If it is not a loan, then what is it? A closer look will reveal that it is far closer in resemblance to a contract known as mudharabah (a type of investment). This is where person A wants to invest in something, and works with person B to make a profit which they share. Person A is responsible for making the initial payments, and person B is responsible for doing the work required to make the profit. - – Helloitsme Mar 25 '18 at 10:56
  • -The percentage that each person takes from the profit is agreed beforehand. Any loss or lack of profit is covered by person A.[4] This is the nature of the contract between a potential university student and Student Finance. Student Finance covers a student’s study expenses, and their studies should, as a result, increase the chances of their finding a well-paid job which, in turn, allows them to share in the profit that the student makes as a result. The profit is agreed beforehand, because how much Student Finance takes from the profit is made clear, and can be found online. – Helloitsme Mar 25 '18 at 10:56
  • If you do not make the expected profit, then that does not fall on your shoulders, and you are not required to pay anything back. then that does not fall on your shoulders, and you are not required to pay anything back. So when you are paying back the money, you are not paying back a loan as they claim. Rather, they are sharing in a portion of the profit. This is exactly how mudharabah works, and mudharabah is permissible according to all the scholars as stated by ibn al-Mundhir" – Helloitsme Mar 25 '18 at 10:57
  • I just wanted to add it because it is an important distinction and ruling regarding the UK student loan system which may be overlooked and which appears very sound. May Allah forgive me for any mistake in this matter. – Helloitsme Mar 25 '18 at 10:58

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