The Islamic ruling on the UK Student Finance loan
Paying for university fees has always been somewhat problematic for many Muslim families. Things became much more severe with the drastic rise in student fees in the UK. This has meant that many students are not able to afford studying at university. Student loans have not been much of an option either for Muslims, as many have avoided it for fear of falling into riba (interest). This has led to a large number of young Muslims missing out on a university education, and thus having their working life affected to various extents.
This article will discuss the fatwa given by Shaykh Dr. Haitham al-Haddad in which he ruled that taking student loans is permissible, and that there is no riba involved at all. The Shaykh spent some time researching into this topic, and this article will hopefully shed light on some of the reasoning and evidences behind that ruling, so that the Muslim student seeking to apply for university may find contentment in taking the student loan without feeling that they are falling into sin. The focus will be the fatwa of the Shaykh, although other scholars have given the same ruling. Some of them gave the fatwa using slightly different reasoning to the Shaykh, but the conclusion was the same. I soon intend to write something much more comprehensive mentioning the different opinions of the scholars and their evidences. For now however, this should suffice as a guide to those who are unclear on the subject; especially, those potential university students worrying about taking a loan for their studies. Those worrying should also know that the one who goes with this opinion is by the will of Allah following the view of the majority of scholars and is not following a weak or a minority opinion. This was stated by some of the highly respected scholars of fiqh in Riyadh who considered this opinion the opinion that goes along with the principles of the majority of scholars. Nonetheless, it is a strong opinion held by some highly qualified scholars.
A summary of the fatwa
Shaykh Haitham al-Haddad as well as a number of other scholars and fatwa organisations of the UK and Europe (including the European Council for Fatwa and Research) gave the ruling that it is permissible for Muslim students to take the Student Finance university fee loan, and that there is no interest involved when one does so. This also applies to taking the maintenance loan. This ruling applies regardless of whether one pays back the ‘loan’ later on or not. In neither case is interest involved, and it is therefore permissible for everyone to take the loan, even if they have plenty of money to cover their studies.
Some of the evidences and reasoning of the fatwa
An essential principle that must be understood before understanding the reasoning here is that the concern of scholars when giving a verdict on something is the reality of the nature of that problem at hand; not what it is called. An example is Ginger Beer. It does not matter that it has the word ‘beer’ in its name. If it does not fulfil the conditions of a prohibited drink, then it is permissible. It would be a clear error if someone were to conclude that this drink is prohibited because its name resembles that of a prohibited drink. Similarly, an Islamic bank may call something ‘interest-free’. If the conditions of interest in Islām are fulfilled, then that transaction is prohibited, even if the company has used the term ‘interest-free’. So names and titles should not deceive us into rushing into decisions. This is a well-known fiqh principle agreed upon by the scholars.
The same can be said about the UK student loan. They may say that there is ‘interest’ involved, or that it is a ‘loan’. If the conditions for a loan are not fulfilled, then it is not a loan; and if the conditions for riba are not fulfilled, then it is not interest.
The UK student loans are not typical loans, and do not really resemble the loan that the Islamic jurists of the past spoke of when they spoke about loans. This is apparent in the following points:
- The loan is not actually paid to the student, so you never get hold of the money in the first place, nor do you have the choice to do with it as you wish.
- The loan is written off after 25 or 30 years.
- The loan is cancelled if you become permanently disabled.
- The loan is cancelled if you pass away.
- You are not required to pay anything if you do not earn above £21,000, even if you are very rich.
All these things indicate that the loan here is not a standard qardh (loan) that is known by the Islamic jurists. The scholars define a loan as ‘giving tamlīk (ownership) of something, so that the same is returned later.’ The element of ownership is missing in the student finance loan. You are not able to spend the money as you wish. This defeats the objective of a loan in the sharī’ah. The loan that the scholars speak of is one that is to be paid off; otherwise it is closer to being a gift. This again, is not the case with the Student Finance loan. One can be earning a decent wage of £16,000 and still not be required to pay anything back. On top of that, the so-called ‘loan’ is hardly a loan because it is written off with so many reasons as mentioned above. A standard loan known in the Sharī’ah is one that must be paid back regardless, unless the creditor later gives permission to drop or cut the loan. Here, the creditor has beforehand given a list of instances when the ‘loan’ is not required to be paid back. So, to call this a loan seems quite far-fetched.
Another key argument here is the fact that the money paid by students is only based on income. This is probably the strongest argument for the permissibility of the student ‘loan’, and should make it quite clear that it is not a loan that fulfils the conditions in the Shari’ah.
The following explains this:
If you ‘owe’ student finance £50,000, then you are not required to give anything back until you earn a salary of at least £21,000 per year. This is regardless of whether you have enough money to pay the ‘loan’ or not.
This means that if you are given £1 billion as a gift or inheritance from a close relative for example, then you are still not required to pay a single penny back to student finance because they only charge on your income. This means theoretically you could be a millionaire and yet you would not need to pay back a penny. Because the agreement obligates payment on your salary and so on only, not all types of money that you have.
This of course goes against all agreed upon types of loans in the Shari’ah. Because anyone who allows you to borrow money from them, expects you to return it back when you have it again. You cannot reply claiming that you will only pay back if you earn a certain amount, because that is not how a loan works. Doing so would be sinful without a doubt. In fact, even if when borrowing the money, you said: ‘I’ll pay you back when I earn again’, you would be obliged to pay the loan back if you have the money, regardless of where that money came from. This is because you only mentioned the salary assuming that that will be your only source of income. Everyone knows however, that if you have millions, you are expected to pay up, even if it is from other than a salary.
The Student Loans Company on the other hand actually does not require you to pay it back unless it is from your salary and the sort. You may have lots of money, and yet you would not be expected to pay the ‘loan’ back.
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. The percentage that each person takes from the profit is agreed beforehand. Any loss or lack of profit is covered by person A.
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. 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. 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.
No doubt, such a transaction is not the first thing that comes to mind when thinking of student loans. We have always simply accepted it to be an interest-based student loan. However, a deeper look into things shows that it resembles mudharabah much more than a loan. It is important to make our main concern the reality of the Shari’ah, and not the intention of the two parties. The issue of intention is clarified further below in the question and answer section. Further, any intricate technicalities that the Student Loans Company agrees with the student, such as the increase of the ‘loan’ and so on, does not affect that this is a mudharabah, because the profit in a mudharabah is left to the two parties to agree on as they wish, as the scholars have explicitly stated. And either way, we have established that this cannot be a loan, so even those who dispute that it falls under mudharabah cannot establish that it is a loan.
This shows the importance of understanding the rulings on business transactions and especially the precision and extensive knowledge required. It is not as black and white as many laypeople think, because the line between ḥalāl and harām can be quite fine, and are only apparent to those well versed in Islamic Law. This is shown by the way the disbelievers in Makkah said, as Allāh stated in the Qur’ān: ‘’buying and selling is just like riba.’’ They claimed that there is no difference between the two. That is because the difference can sometimes be very minute. However, Allāh the All-Wise knows why one is good for us (and thus permissible) and the other is harmful (and thus prohibited).
Finally, the important fiqh principle says: ‘’all financial transactions are permissible, until it is proven otherwise.’’ So the burden of proof is upon the one who claims that a certain business transaction is prohibited. The one who says it is permissible is upon the neutral and original position. This further strengthens the ruling of permissibility. We have seen that it cannot be said that the student loans are clear riba; otherwise there would not be so many scholars who say that there is no riba. So things are to be kept permissible until someone can provide sound and clear evidences to prove otherwise.
A point of advice for Muslims in these circumstances
I finally wanted to comment on what I saw on social media from some of those who first learnt about the fatwa at hand. Statements such as: ‘This is clearly harām’ were thrown about. If indeed, it was that clear to someone who has no expertise in Islamic Law, then it surely would have been even clearer to the many scholars who have dedicated their lives to studying the religion. This is especially the case, since these scholars spent a very long time looking into this matter. So it is important that we Muslims respect our ʿulamā and those who are far more experienced in knowledge, and that we learn to humble ourselves towards them. As the salaf used to say: ‘may Allah have mercy on a man who knows his place.’ We must fear Allāh in rushing into saying: ‘this is harām’ or ‘this is ḥalāl’. Rather, we must refer it back to the scholars who have spent many years at the feet of scholars, and not anybody who is good at public speaking and playing with the emotions of those with weak intellect and hearts.
‘’Say, ‘Have you seen what Allāh has sent down to you of provision of which you have made [some] unlawful and [some] lawful?’ Say, ‘Has Allāh permitted you [to do so], or do you invent [something] about Allāh?’’
I have known Shaykh Haitham to be careful in his rulings, especially when it comes to riba. Despite this, I heard him say: ‘I have absolutely no doubt that there is no riba involved in the student loan’. Several experts in Islamic finance were consulted, and they concurred with his judgment, and some of the scholars even explicitly stated that this is the position of the majority of schools. This should, by the will of Allāh, put some tranquillity in the hearts of those who are so worried about the student loan.’
Below are further answers to queries that people often have relating to this topic. See them for further information as they will give a better understanding of the topic. I did not want to include it in the main article for the sake of conciseness.
And Allāh knows best, and success is from Him alone
Some common questions that relate to this topic
Q1: This is a big topic. Is it enough to rely only on the fatwa of one scholar?
A1: Many brothers and sisters are famous for giving dawah and reminders (may Allāh accept their work), but they are not qualified to give rulings on Islamic topics, especially those topics that are of concern to the wider Muslim community. So we must understand that we can benefit from such speakers only in their fields of giving reminders. If we seek Islamic verdicts, then we must look to those who have many years of experience in the field of fatwa and fiqh.
This article has mainly relied upon the scholars of Europe and the UK. This is based upon the well-known principle that the scholars have mentioned: ‘’a ruling is a branch of understanding the reality of the matter at hand.’’ This means that one cannot give a ruling on something unless he has full understanding of what that thing is. If a scholar wants to give a ruling regarding a certain business transaction, then he must first fully comprehend the nature and reality of that business transaction, so that he may give a correct ruling. It is therefore well known that the scholars of the past used to command people to ask the scholars of their country when it came to issues that may be specific to the people of that country. Allāh states: ‘’But if they had referred it back to the Messenger or to those of authority among them, then the ones who [can] draw correct deductions from it would have known about it.’’ The words ‘among them’ is a clear indicator that those most worthy of being asked are those scholars who are from amongst the people. Shaykh ʿAbdul Raḥman al-Sa’di (r) said: ‘’the lay people should not follow scholars from outside their country, because this leads to chaos and dispute.’’ This refers to issues that require one to live in that particular country or at least be fully aware of the circumstances surrounding the issue, as is the case with the UK student loan.
We have seen the importance of the above ruling manifested in the student loans problem. Some of the scholars outside the UK were asked about ‘taking an interest-based student loan for studies.’ The obvious reply was that this is prohibited, because the questioner has given the mufti no other choice when he used the words ‘interest-based’. This is a big mistake. Rather, the questioner should have explained the transaction at hand and its nature in full detail. Only then can the mufti give a valid answer.
The scholar who lives here in the UK and understands the circumstances of the country will also be more aware of the consequences of his fatwa, which is another essential principle in the science of fatwa. This is why the great companion, ʿAbdullāh b. ʿAbbās gave two different answers to the same question from two different people. Because he realised that the mufti must understand the consequences of that ruling. Someone living thousands of miles away from the UK will unlikely appreciate the effect his ruling can have on the people of the UK. It is therefore a priority that one asks those people of knowledge in his country.
If the fatwa of one scholar from the UK who specialises in this field is sufficient for us as Muslims to follow, then this is even more so the case if so many other scholars have also given the same ruling (see footnote 2). There is no doubt that this is an opinion supported by many scholars, and one that is sound and valid for every Muslim to follow by the will of Allāh.
Q2: Shouldn’t we laymen do our own research to see what the ‘correct opinion’ is and then follow that, rather than simply trusting the opinion of some scholars?
A2: The concept of the ‘correct opinion’ is subjective. Ask one scholar and he will tell you the correct opinion is this, and another scholar will tell you the correct opinion is that. On top of this, it is unimaginable that a layman who has little or no knowledge of the fiqh of business transactions can come to a conclusion on such a difficult topic. If it took as long as it did for jurists to come to a conclusion, then the layman will not benefit much in trying to come to their own conclusion. Further, the layman will hardly be able to appreciate the evidences and reasoning used by the scholars; and if he manages to understand, then he will not comprehend the significance of each proof. This is why Allāh commanded us to ask the people of knowledge, and He did not ask us to spend a long time doing research to find the opinion that we believe to be stronger, because most people cannot do that. Huge volumes have been written on these topics, so it is unreasonable for us to expect people to read through all this and try to come to a conclusion.
Your duty is find a scholar who you trust (preferably from your country as mentioned above) and who you believe to be qualified in knowledge, and ask them. The answer they give you is what you should then go with, even if you did not do your own research on the topic. This is an agreed upon matter by the scholars of Ahlul Sunnah. As Imam ibn Qudamah (r) stated in Al-Rawdhah, and Imam ibn Taymiyyah (r) in Al-Musawwadah, and Imam al-Ghazzali (r) in Al-Mustasfa; the layman must ask the scholars for rulings relating to their religion, and they are not required to ask for the proofs of the scholar, nor his reasoning. It is enough to follow their fatwa as explicitly stated in the Sunnah. This was something agreed upon by the early scholars, and as ibn Qudamah (r) said, only the Mu’tazilah and other sects disagreed on this issue and said that the layman must also look into the proofs and come to how own conclusion. But this is against the ijma’ of Ahlul Sunnah. No doubt, it is good for the advanced student of knowledge who has studied for many years and perfected the Arabic language and the Islamic sciences to look into the proofs and differences of opinion, but this is not obligatory. It is enough for the layman to follow the ruling of a qualified scholar they trust.
Q3: Neither Student Finance nor the student have an intention that this is an investment, so how can this be an investment. Surely intention matters?
A3: Intention is not always considered, especially when the conditions of the Shari’ah are not fulfilled. For example, if person A tells person B that he wishes to give him a BMW as a gift, but person B needs to give him £1 at least in return. That one pound is so insignificant that both person A and person B consider this transaction a gift, because such an expensive car is worth thousands more, and even though person B gives him £1, that pound is nothing and therefore this surely is a gift. That is what the intention of both parties is. And if person B was to later remind person A of him selling the car, person A would probably laugh at him. As far as he is concerned, he gave him a gift and it was not a sale. Despite all this, they would both be wrong. The Shari’ah actually considers this a sale. There is no doubt amongst the scholars that this is a sale, because the pound was a requirement in the contract. So it is a mistake to say that intention always matters.
Similarly, even though both parties in the student finance ‘loan’ think that a loan is being taken, they are mistaken as per the Shari’ah. They may well be right according to Student Finance regulations, but according to Islamic Law they are not correct. Rather, the conditions of a loan have not been fulfilled in the Shari’ah and so it is not a loan, even if their intention was otherwise.
Q4: Some people say the loans are haram, and now I have read this. What do I do?
A4: I explained above why the UK scholars are more worthy of being followed on matters that pertain to the UK Muslim community. Similarly, the European Council for Fatwa and Research is one of the more worthy fatwa councils of being followed than others in this case for the following reasons:
- Its members are from the great jurists of the world, such as Shaykh Yusuf al-Qardhawi
- Many of its members are from the UK or have lived here for a long time, all of whom have vast experience in Islamic Law.
- It is a large body with many members, and whenever more scholars agree on a particular matter, it is more likely to be correct.
- They work very hard in studying the circumstances of the Muslims in the UK, and understanding the reality of what the Muslim community goes through.
It is natural that some people say it is harām to take this loan. Opinions will always vary, and people tend to be extra cautious when it comes to transactions they are not so familiar with. However, we have a great number of scholars who have looked into the matter in depth, and have ruled that it is permissible for a Muslim to do so.
I end with another important point to keep in mind: there should not exist the glorification of harām which is common amongst young Muslims. They think that the more you believe something to be harām, the more pious you are. This is a grave error. As the great Imām Sufyan al-Thawri said: ‘true knowledge is a concession given by a trustworthy scholar. As for strictness, then that is something everyone can do.’ Making the permissible harām is just as grave as making the prohibited ḥalāl. The truth is that which was revealed by Allāh Almighty. If it is permissible, then that is the truth, and if it is impermissible, then that is the truth.
Q5: But this is such a big harm to the Muslim community. Students leave university with so much debt. So how can it be made permissible?
A5: That is where you are indeed incorrect. The exact opposite is true. The whole reason this fatwa is being pushed and spread is exactly because of its great benefit to the Muslims. If it was a harm, then even those who believed it to be permissible would remain silent. The student loan is a great benefit to the UK Muslim community, because students are not falling into riba as we stated above, and very rarely do they pay back the full amount unless they earn very large amounts of money. Those who do not earn £21,000 are immediately out of the question. They will not pay back a penny. Those who earn this amount, will pay some money, but will never pay back the full amount, because by the time they get anywhere near the £40k or sometimes £80k that they ‘owe’, the 25 or 30 years will have passed and anything remaining will be waived. Even the high earning jobs are unlikely to pay back the full amount, because graduates usually start off on £16k or maybe £20k if they are fortunate, and this only gradually goes up, and once again by the time they come close to paying it all off, the ‘loan’ will be written off by that time. This can often be the case, even for doctors who earn £50k or £60k, because medical students usually will have taken out a ‘loan’ of £70,000 altogether, which then rises quickly and may reach as high as £100,000. Once again, by the time they reach the £70k of ‘re-payment’, the 30 years will likely be up. Most graduates have not even thought about this ‘dept’ that they are in because they are not affected by it. So there certainly is no harm to the Muslim community at all.
The student finance loan also has made life so much easier for Muslim students because they have not had to worry about working while studying or borrowing huge amounts of money. All this is assuming that the student only takes out a loan for his undergraduate studies. If he was to take further loans for an MA and a PhD, then this is even more clearly distant from paying back anything. If we assumed this to be an interest loan, then a tiny minority of students will pay back the full loan, which means that there is still a huge benefit for the community. So the fact that we have shown that this does not qualify as a loan at all means that this indeed is a major benefit for us.
Qadi Abu Ya’la al-Hanbali (r) related in his book ‘Al-Uddah’ that Imam Ahmad (may Allah be pleased with him) was asked a question about something he considered prohibited. Rather than answering the questioner with his own opinion, he directed him to another scholar who considered it permissible. Imam Ahmad (r) wanted ease for the questioner even though he himself believed the action to be prohibited, and this was the practice of many of the pious salaf. So it is not from the practice of the salaf to want to make things haram unless they really had to; not to rush into making things prohibited, which unfortunately is the practice of some unqualified youth today. It does not mean that we follow our desires in making the haram halal, but at the same time, we should want ease for the people and follow in the footsteps of the righteous scholars.
And Alhamdulillah firstly and lastly
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 The reasoning used by some other scholars for saying that the ‘loan’ is permissible differs from the one mentioned here. Nonetheless, the conclusion is the same. Indeed the various reasons for proving the permissibility is a way of strengthening this opinion, and Allāh knows best. Their evidences and reasoning will be mentioned in full in a later writing that I ask Allāh to make easy. I have left them out here to keep things concise.
 The European Council for Fatwa and Research is a large body of scholars and jurists from across Europe and the world. They come together to give rulings and answer questions that are of concern to the Muslims in Europe and the West. The committee is headed by the honourable jurist of our time, ‘Allaamah Shaykh Yusuf al-Qardhawi, one of the leading scholars of the world today. Its members include: Shaykh Dr. Issam al-Bashir, Shaykh Dr. Suhaib Hasan, Shaykh Dr. Salman al-Odah, Shaykh Hussain Halawa, Shaykh Dr. Abdullah al-Judai’ and Shaykh Salem al-Sheikhi, as well as others.
 See Mughni al-Muhtaaj (2/117)
 See Sharh Muntaha al-Iradaat by Imam al-Buhooti (3/563)
 Al-Ijmaa’ (pg. 140)
 Surat al-Baqarah: 275
 See al-Mughni by ibn Qudamah, chapter of transactions.
 Al-Qur’ān, 10:59
 Al-Qur’ān, 4:83
 ‘Liqaa al-Bab al-Maftooh’ from the fatawa of Sh. Ibn ‘Uthaymeen (20/32)
 See Tafseer al-Tabari and Tafseer ibn Kathir (explaining verse 93 of Surat al-Nisa)
 Jami’ Bayaan al-‘Ilm wa-Fadhlih, ibn Abdel Barr (Hadeeth 911)
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