24 February 2024 Guidance on student loans from Islamic scholars

From the website of the British Board of Scholars & Imams [BBSI], a report that takes a “deep dive” into the student loan contract, including results of a survey that sought the advice of its members. and offers useful guidance to students entering higher education. Of the 205 ulema who participated in the survey “there was a clear divide within the scholarly community upon these issues, with an almost equal split between those who regard student loans as halāl versus harām. Approximately a fifth of respondents were still unsure and undecided about the issue.”

Although there is a body of scholars who find nothing that is prohibited by Islamic law in the student “loan” contract, the use of words such as “loan”, “debt”, “interest” etc. in the context of student finance is objectionable to Muslims and also causes confusion among Muslims students [. . .] We strongly recommend that the UK Government consider providing an “alternative finance” version of the student “loan” contract which replaces the words that are objectionable to Muslims with words that are neutral. This will be in line with the government’s stated policy objective of ensuring financial inclusion for all British citizens and creating a level playing field for all.”

click here for BBSI’s guidance.

The weight of the BBSI guidance is to argue for the take-up of student loans, since ” the creators of the student finance contract did not intend to create a debt obligation as we traditionally understand debt. Rather, they recognised that student finance is an investment in people. Like an investment, and unlike a debt, the obligation (iltizām) on students is contingent on income. Ultimately, as an obligation that is contingent on income, student finance operates in the same way as income tax. The poor payback represents a cost to the taxpayer.”