By Faima Bakar
3 Nov 2019
‘I didn’t take out a loan for my masters because it’s Haram so I planned to save up my salary to pay it off,’ explains Muslim writer Rabbil. ‘It didn’t go well because of rent and bills. I was just struggling already. My family had to step in which I was embarrassed by.’ Like Rabbil, many Muslims hoping to get an education face a dilemma – to take out or not to take out a student loan. You might not be aware but for Muslims, interest is Haram (forbidden). Any loans that require repayment with interest added on are not permissible. This is because in Islam money has no intrinsic value – it’s just a medium of exchange. That means Muslims have to work for money to attach its value. Simply lending and borrowing money doesn’t count as ‘work’. So taking out a loan and incurring interest on it is considered impermissible – because the bank (or person lending) hasn’t ‘worked’ to earn extra payment. The limitations put on borrowing can stop students from pursuing university altogether. Those who still choose to study via halal means, such as borrowing money from their loved ones, can end up in large amounts of debt.
For teacher Faisa, despite knowing the difficulties of self-funding her degree, going against Islamic principles was not an option. ‘I knew from early on that I didn’t want to take a loan,’ she tells Metro.co.uk. ‘When the £9,000 fees were announced during my second year of the sixth form, I thought “That’s it. University isn’t for me”. ‘I believe that interest is Haram and I wasn’t willing to listen to anything else. That didn’t go well with my parents who were adamant that I had the higher education they never had.’ As a necessity, Faisa applied for a student loan to cover her first-year fees and also got a maintenance grant which did not need to be paid back. She didn’t apply for the maintenance loan, however, as it needs to be paid back with interest. ‘In second year, I basically saved every penny of the grant (plus I was entitled to a university grant too),’ she explains. ‘I worked as a private tutor, and luckily had some financial help from the Danish government (since I’m a citizen and they pay for you to go university). ‘I managed to make up almost all of the fees for second and third year this way but I’m still in debt.’ Having to worry about paying these fees without relying on a loans company negatively affected her quality of life. ‘It was really difficult but I realise I’m in a lot less debt than many of my peers,’ Faisa tells us. ‘Also, I was constantly broke as a student and never, ever did anything remotely fun. ‘I was always felt too guilty if I spent any money on myself.’ While she doesn’t have to pay back the Danish government, Faisa is still indebted to the Student Loans Company for her first year.
At the moment, the UK government doesn’t offer a system where a Halal student loan can be taken out. A Halal student loan system could allow Muslim students to take out a loan but make charitable contributions rather than paying interest back. While that’s being discussed, some Muslims are missing out. Like Faisa, Masuda also had to weigh her options when it came to Halal financing. She’d planned to raise the money needed to cover her tuition fees. ‘I tried but ultimately failed,’ she tells Metro.co.uk. ‘I took a gap year [to raise money] but I got so comfortable in working I didn’t return. ‘However, I do have hopes and plans to go one day. I now work at a school and I do speech and language however to progress further I need that degree so the plan is to go back.’ She’s not sure how she’s going to afford university when the time comes but doesn’t plan on taking out a non-Sharia-compliant loan. She’s hoping that some help will be available to her.
Without Sharia-compliant loans, Muslim students often have to plan meticulously, stashing away their time and money for years to afford an education. Technological officer Imad tells us: ‘I did some calculations and modelled it on Excel. I researched and estimated what my income would be based on receiving a maintenance grant, a yearly grant from King’s College and working part-time. I also estimated my outgoings which were inevitably less due to the choice to live at home and stay in London to study. ‘Those were my initial calculations which allowed me to break even. ‘Beyond that point, I knew having a part-time job along and hopefully securing one or two internships would provide me with the extra income that I could use for my outgoings outside of the core fees.’ He adds that it was stressful having to live scrupulously and scrape up enough to pay each installment in time. Despite the pressure, he is unmoving in his position on accepting loans. ‘My cultural upbringing along with religious teachings strongly recommended the avoidance of debt,’ says Imad.
While some believe that student loans are impermissible, others say that ‘necessity legalises the prohibited’. In other words, it’s unlikely that a person will be able to afford extortionate tuition fees for an education that is required for many jobs. Others also argue that the student loan is unlike any other and doesn’t go against Riba (or usury – lending money at unreasonably high rates of interest). The conditions of a student loan – that it’s written off after 30 years, cancelled in case of debt and disability and paid only after earning £21,000 a year – make it different to others, say some. All these things may indicate that such loans are not a standard loan, which is shunned by Islamic jurists and therefore may be allowed. While the conversation is happening, many Muslims will agree that a government-led system would make the decision a lot easier to make. Otherwise many bright followers of the Islamic faith will be prevented from accomplishing their educational goals.
Original Headline: My halal student debt: How Muslims navigate Sharia financing when interest is Haram
Source: Metro, UK