Is Student Loan Halal?

Nez328i · Joined: 16 Dec 2007 Posts: 92 Location: London

Question: When starting University in the UK, you can take out a student loan from the Local Education Authority (LEA). The LEA claim the student loan has zero percent interest. However, due to the fact that the loan may be paid back over a long period of time, the LEA takes inflation into consideration and charge a tiny bit more when you are paying back the loan. This type of loan from the LEA is different to a standard student loan from a bank.

Some brothers say this student loan is halal, since on the contract it says zero percent interest, and we should be concerned with the contract. They also say inflation is not interest, rather, inflation is paying back the same value as you borrowed, which is the correct thing to do from Islam. Other brothers say, inflation is still making money on money, which is Riba and therefore, haram. Please could you clarify this issue?

The answer to this question, will determine whether some brothers will be able to continue further education or not, because they are not prepared to declare war on Allah (SWT) and His Rasool (SAW). At the same time, their families can not support them at University.
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Nez328i · Joined: 16 Dec 2007 Posts: 92 Location: London

We need more replies here Smile

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Nez328i · Joined: 16 Dec 2007 Posts: 92 Location: London

Sheikh Ahmad Kutty, a senior lecturer and Islamic scholar at the Islamic Institute of Toronto, Ontario, Canada, states:

�You are allowed to take the OSAP loan if you have no other alternative � provided you are sincere in your intention to pay it back without incurring interest according to the best of your ability.

In order to make this happen, you should take only the absolute minimum amount that is needed which you would be able to pay off within the allowable time period. If you sincerely work and ask Allah�s help, you will be able to do so. I know many students who have been there; they did manage to pay the loans back without involving any interest whatsoever through hard work and firm commitment to do so with the help of Allah.

The way they achieved this was that while being enrolled in their full-time studies, they also secured part-time jobs (such as security guards or in the library, etc.) which did not interfere seriously with their studies; besides this, they also made use of full-time summer employment.

A still better alternative is to try to get a stipend or bursary, which is not at all impossible to obtain if you are diligent in your academic work.
The Prophet (peace and blessings be upon him) taught us that whoever wishes to keep himself chaste, pure and free from sins, Allah will surely help him to do so.

So formulate sincere intention to avoid interest payment, work hard and seek help from Allah, and Allah will help you. Allah says, �Whoever fears Allah, Allah will surely make things easy for him.� (At-Talaq: 4)

To conclude: If you tried your best to keep the loan to a minimum and strove to pay it within the period, you have done what is possible for you. If, for reasons beyond your control or means, you could not pay all of them on time, then Allah knows your circumstances; so ask forgiveness of Him, for He is Forgiving and Merciful. I wish you all the success in your studies. Pray to Allah always making use of the following supplication:

Allaahumma aghninee bi halaalika `an haraamika wa bi ta`atika `an ma`siyatika wa bi fadlika `amman siwaaka
(O Allah, make me self-sufficient with that which is halal (lawful) so that I am not compelled to go for what is haram (unlawful); make me self-sufficient with obedience to You so that I am not led to disobedience; make me self-sufficient with Your favor so that I do not need to look to favor from others!)�
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