Fatwa #1428431 May 2006Canada
Is it permissible to take interest-based loans for studies (student-loans)?
Question
Is it permissible to take interest-based loans for studies (student-loans)? A Muslim brother whom I know asked if it is a sin for him to study in University by taking intererst-based loans. Due to his full-time study schedule, he can't get a part-time job and the government doesn't give any financial benefits to students in post-secondary studies. Thus, he can not survive without the student loan. He can work during the weekend but that will not cover his rents, food costs, clothes, tuition, books, etc.
The only option he has to cover his basic expenses is to quit the university studies and get a full-time job or He can study in University while taking the government student-loan which is ineterest-based. The interest starts to accumulate the day he stops being a full-time student. In other words, interest will only be accumulated when he is done his studies. During his studies, there is no interest. The government did this to help students to pay less interest.
So What should he do? Should he quit the university studies and get a job or should he continue with his studies through the student loan?
Answer
The Darul Ifta has been receiving similar queries and problems of paying interest on study loans from Muslims of North America for a long time.
Issuing a Fatwa will not resolve the problem. It is our advice that a group of concerned Muslim students approach a renowned Muslim organisation to address the issue and seek an alternative for Muslim students. The organisation could discuss the problem with Government officials and representatives and provide them with alternative to facilitates for Muslims.
One has to be well versed with the financial structures in North America to suggest Shari’ah compliant alternatives. If an effort is made, then this will be a great service to the Muslims of North America. We will be happy to comment on the Shari’ah compliance of some alternatives presented to us before discussing them with government officials and representatives.
and Allah Ta'ala Knows Best
Mufti Ebrahim Desai