Getting an education in the UK and the USA can be expensive.

Many students decide to take interest-based loans and end up paying much more than what they took. Most student loans offered by banks and credit unions are haram because they involve interest. But this is a dilemma for Muslims looking for halal student loan.

Are you pursuing a professional degree, and wondering what halal student loan options you have for college? Here is all you need to know.

Are Traditional Student Loans Halal?

According to most Islamic scholars such as Dr Zakir Naik, Nouman Ali Khan, Mufti Amjad Mohammed, and Shaykh Dr Haitham Al-Haddad, the traditional student loans that involve interest are not halal.

However, government-offered student loans that are interest-free are halal. Shaykh Dr. Haitham Al-Haddad gave a fatwa that the UK government’s student loan that involves interest is also halal. 

Here is a summary of what he said:

“If the government provides the student loan to study at a government university, then it is not a typical loan, and the interest charged on that loan is not typical Riba. The government provides you with money as a service to help you study. 

So, when you make a profit after getting the degree, the government wants to share it. 

If you don’t make enough money after getting the degree, you don’t have to pay the loan. It is different from the typical loan because the government wants you to become a beneficial citizen by helping you acquire higher education. “

The government’s motive behind this fixed interest is not exploitative; hence, it is permissible in Islam.  

Islamic Rulings on Halal Student Loan

As Muslims, we must work or put in some effort to make money. There is no intrinsic value of money; it is just a medium of exchange in Islam. So, lending money to earn interest is haram.

Also, banks that give out loans might be financed by companies involved in gambling, alcohol, or pork business. Taking a loan from a bank and repaying it along with the interest will help such companies or the industry grow, which spreads evil in society. Therefore, Muslim students should avoid getting loans from non-Sharia-compliant banks on interest. 

Here are alternatives to getting interest-based loans:

1. Family and Friends

Your loved ones might be willing to loan you money interest-free if they respect your beliefs. Ask an older sibling or a wealthy aunt if she is willing to loan you money for college tuition and other related expenses. 

 You can pay the loan back as soon as you graduate and get a job or start a part-time job to pay it off. If the person lending you money owns a business, ask if they have a job for you. If you have some time, you can work for them part-time to help them with basic day-to-day tasks, and they can help pay your tuition fees. 

Remember, you might have to hear “NO” from them, which is totally fine because everyone has their financial situation. It can be hard to support a friend or family member sometimes. But it is worth asking. Many college students got their family members or friends to pay their fees and returned the money later. 

2. Scholarships

Scholarships come in different forms. There are bursaries, tax breaks for students, need-based scholarships, and discounts for certain ethnicities or groups of people. Every amount of money that you can receive counts. You might think that isn’t a lot of money, but really, a college education is expensive.

You have to pay tuition fees, books, stationery, and supplies, living and food expenses. Search for scholarships online or ask friends who are already in college for advice. Check what the federal and local governments offer. Also, search for scholarships offered by charitable organizations. Apply for all of them to up your chances of securing one. 

If you are a foreign national residing in a different country, check if you are eligible to apply for a scholarship from your home country’s government. Or you might decide to study in your home country if you can get a scholarship to study at a government university. 

Scholarships don’t need to be paid back, so you won’t have to worry about it. 

3. Subsidized Loan

Some Non-governmental organizations (NGOs) and government organizations also offer subsidized loans to students. For instance, you can get a Federal student loan that has a six-month grace period. After graduation, you’ll have six months to pay back the loan interest-free, but it won’t be obligatory.

Upon completion of 6 months, you’ll have to start paying back your student loan along with interest. Now, with the right timing and strategy, you might be able to pay it off in six months.

Your strategies can include:

• Getting a loan is just enough to cover major expenses like college tuition fees.
•  Get a part-time job to pay for other expenses and save a little every month.
•  Start saving early (in your junior year at college), and you might have enough to pay off the loan after graduation. 
• Don’t have enough savings to pay off the loan after graduation? Take a gap year and work full-time to save money. 

Moreover, delaying graduation can help you avoid interest on loan repayment. Save up and pay off the loan as soon as possible after graduation to avoid interest. 

4. Working in Under-Privileged Areas

The government offers certain programs for free to students who are willing to work in underprivileged areas – e.g., the healthcare industry. The government pays their loans and living expenses, etc., but the only downside is that your career options will be limited. You’ll enter a contract to serve them for a specific time. 

But if healthcare is your passion, and you want to serve people in underserved areas, this is a great way to avoid interest. If the government or an NGO pays your federal student loan right after graduation, you won’t have to pay interest. 

Other options like these can be for lawyers. Professionals who opt to work in the public sector can apply for such programs before graduation – to land a job that starts paying them nicely or pays off their loans. 

5. Get a Job or Internship 

If your education program allows you to have extra time and less coursework during the week, you can get a full-time or part-time job. Many students choose to work part-time, preferably flexible hours, to afford education. 

If you have less time during the week, you can also opt for an online job or freelancing. Or work only on the weekends or days off, such as package delivery gigs, or volunteer at an NGO. In a junior or senior year at college, you can also get a job related to your field.

The wages or salary at your job or internship are also crucial. If you make $1,000 a month, and you owe $45,000 in student loans, it might be challenging to pay up quickly. Take a practical approach and prepare yourself for a high-paying job before you get into university. You can also start working in a high-paying field before joining a university to save up and skill yourself. 

With the right experience in a field, businesses will happily hire you and pay much more than the average industry.

Final Words

Unfortunately, there aren’t many halal loan options in the market, and this compels some Muslim students to either take traditional student loans or drop out after high school. All of this can become a huge barrier to Muslims’ educational system. It can deprive us of the important job positions in the society.

Hence, Muslims will lose their representation and become a minority that is seen as illiterate and incompetent. It can also lead to the assumption among non-Muslims that Islam is against education. But in reality, Islam encourages Muslims to gain knowledge.

If you are unable to find a halal student loan to finance your education despite trying everything, your last resort can be an interest-based government or private student loan. Then, it’s your personal decision – take it or leave it. 

Some Islamic scholars are also of the view that taking of interest is haram, not giving. So, when you get a loan, you pay interest to the bank, which is permissible according to scholars such as Shabbir Ally if all other conditions are Shariah-compliant. But the scholars also say that taking an interest-based loan must be your last resort; strive to go for a Riba-free loan.