i know that student loans are haram because you have to give interest even if it is at the rate of inflation it is still haram. But i only found out that it is haram after i got the loan, there are two types of student loans that you can get tuition fee loan and the maintenance loan. The tuition fee loan goes straight to the university but the maintenance loan comes directly to you.I wanted to know that if you can spend that money and is the money haram or the repayments haram because i don’t want fall into that category where non of good deeds are not accepted if the money is haram for me.if you cannot spend that money what shall i do with the money.
In the name of Allah, Most Gracious, Most Merciful
Assalaamu `alaykum waRahmatullahi Wabarakatoh
We make du’a that Allah Ta’ala grant you Halaal in every aspect of life and accept all your good actions, Ameen.
There are different types of student loans available. The structure of these loans differs from institute to institute. However, they all are common as far as interest charges are concern. Some institutes, like finance houses, finance students with loans that include interest charges from the very outset of the transaction. For example, the institute would loan £5000, and would charge interest on this amount. Such loans are impermissible as they involve direct interest. If you have obtained such a loan, we advise that you contact the loaning institution, request them to cancel this transaction and return the monies to them. If this is not possible, you may distribute the money to the poor (without the intention of reward) and obtain a Qardh Al-Hasanah (interest free loan) and pay off the loan. If this is also not possible, you should continue to seek forgiveness for involving yourself in interest and make sure that this does not happen in future.
Other institutes, like educational departments, finance students with loans that accrue interest only six to seven months after the student graduates. No interest is charged from the time of graduation up to six to seven months. If repayment of the loan is made within six to seven months after graduation, one is exempted from the interest charges and if repayment is made after six to seven months, interest would be charged therefrom. It will be permissible to obtain such loans as long as repayment is made within those six or seven months and the interest charges are avoided. We are aware of many Muslim students that opt for this type of student loan. They take up part time jobs during the course of their studies and work hard after graduation in paying off the loan within six to seven months after graduation, avoiding the interest. We advise that you seek such a loan.
We do realise the difficulty Muslim student’s face in obtaining interest free loans. In order to circumvent this difficulty, we advise:
1. Muslims students may opt for loans that accrue interest only after six to seven months after graduation or any other loan of similar nature. However, the procedure explained above should be implemented.
2. Muslim students may obtain bursaries and scholarships from Companies to finance their education. Service and assistance to the Company after graduation (e.g. six years) would be repayment for the finance. This has a twofold benefit, i.e. ones education will financed in a Halaal manner and one will gain experience by working under the supervision of a Company.
3. Education plays a vital role in the progress of any country. Great importance is given to education by officials of countries and institutes. Similarly, many countries respect the religious rights of their citizens. Muslims abiding by rules of a country are worthy of assistance from its officials and authorities. We suggest that a delegation of influential Muslims personals should present to educational departments and institutes the difficulties encountering Muslim students as far as obtaining interest free study loans. They should be advised that as Muslims we are prohibited from involving ourselves in interest bearing loans. Surely, they could design a finance scheme to accommodate Muslim students. We will be more than happy to render our assistance in designing a much awaited scheme of this nature.
And Allah knows best
Wassalam
Ml. Talha Desai,
Student Darul Iftaa
Checked and Approved by:
Mufti Ebrahim Desai
Darul Iftaa, Madrassah In’aamiyyah