Wa alaykum salaam,
I acknowledge your difficult situation and current predicament.
The issue with student loans is not straightforward as we are talking about getting interest-based finance for university education. We can only discuss finance part once we’ve framed and conceptualised university education.
Therefore, there are three things to consider:
- University education
- Student loans
- When & how to payback
The vast majority of education is useful, has utility and is beneficial for oneself and others. Some forms of education are either discouraged or impermissible from an Islamic perspective. For example, Imam Nawawi and others state that learning witchcraft and sorcery is prohibited. However, Ibn Abidin and Ibn Hajar Haytami narrate some views of scholars who felt even witchcraft depends on the intention and that if studied to repel harm or to be aware of what the evil people do, it is permissible.
In principle, we learn that whatever is beneficial is encouraged; whatever is harmful, depending on the degree of harm and impact it has on one’s faith, it is discouraged or outrightly prohibited.
There is definitely a hierarchy in terms of what is the best subject. Imam Dhahabi ranked medicine second after the knowledge of Shariah. We understand that the value and worth of a particular type of education and knowledge depends on how beneficial it is in this life and the next. Knowledge of Shariah is the most beneficial as it is eternally beneficial. Thereafter, whatever is most beneficial for the world and brings most benefit to the people. I believe that this depends on several factors now and it is very difficult to rank education as everything has relative benefit and one type of knowledge is more needed at times than others. So as a first point, most of education is valuable and can be considered as encouraged by Islam as it brings benefit to the people. Further, the value of a particular study can multiply depending on one’s intention. For example, a lawful and valid intention is to seek a career. This is rewarding also. However, to study and seek education to want to serve humanity and bring benefit to others generally, is more rewarding and praiseworthy. But, to study to want to serve Da’wah and calling towards Islam in particular is the most praiseworthy intention.
There are various subjective views on the value and worth of university education. It’s hard to generalise as not every degree is the same, not every university is the same, not every experience is the same and most certainly, everyone’s socio-economic status is different. You cannot generalise with so many nuances and variances in such a sensitive subject.So whilst respecting and appreciating different arguments, my personal thoughts are as follows:
The manner in which Asim Qureshi, the CEO of Jibble described university courses really resonated with me and it was something I was leaning towards long before but could not articulate it in the manner Asim did. He said in a LinkedIn post:
"The reality is that most people don’t do degrees to fulfill a passion - they do it to get jobs and make money - let’s be honest.
And at a time where degrees are being questioned, I believe for most, degrees are still massively useful - in that they are passports in a world that will need more time to see beyond them."
So two points which really stand out for me are:
- Seeking a career
Most people want to excel and get a high-paying job. That is totally fine and in fact in line with Islamic guidance. The Prophet (peace be upon him) encouraged us to seek halal and lawful wealth.
But the second point is crucial, university degrees are like passports; in many instances, you need them to get to a particular role/career.
Having said that, not every degree is necessary for a career in a particular field. There are many careers which can be embarked on without university education. These careers have alternative industry qualifications which are just as good if not better.
Further, university education is not always necessary to get wealthy or be beneficial. University education is more for a particular career or specific role a person seeks to achieve.
Further, university education allows Muslims in a minority to excel and stand out. We need representation more than ever in various sectors and industries. As a nation, we can only excel if we are an educated community which guides and benefits others. Some degrees are not only beneficial for Muslim representation, they actually serve us and allows Muslims to be served by Muslims in sensitive scenarios.
So to summarise, education is praiseworthy and its value increases with noble intentions. Seeking a career is absolutely fine but degrees are passports in essence and part of a journey. They are not the only route, there are many other routes for a particular career.
2. Student loans
A student finance guide reads:
‘You have to register at your university or college before we can make your first payment. You’ll usually do this in the first week of your course and you may have to take along your Student Finance Entitlement letter. Your university or college will let us know you’ve registered and we’ll make your payment.’
When a student registers for a course, the university is due a payment. The student can either pay or opt for student finance. If he selects student finance, the student finance will make the payment. The exact interpretations depend on whether the Student Loans Company (SLC) is legally liable to pay the university or it merely acts on behalf of the student without any legal duty on them.
- If the university makes the Student Loans Company liable to pay and it forgoes the liability from the student, the scheme can be considered a Hawalah (debt transfer).
Hawalah is defined as a contract through which the liability for the settlement of a debt is transferred from a principal debtor (muheel) to a transferee (muhaal alaihi). When a valid hawalah is concluded, the debt is no longer demanded from the principal debtor. The three effects of a hawalah contract are:
- the transfer of a debt and the liability for its payment from the principal debtor to the transferee,
- the release of the principal debtor from debt and liability, and
- The resulting right of the creditor to claim the debt from the transferee.
- If the SLC agrees to pay on behalf of the student, this will be a simple Wakalah (agency) and a loan to the student.
In both the Hawalah and Wakalam-cum-Qardh structures, a loan is extended and any increment in repayment is interest. However, unlike other loans where repayment is more likely, student loans are different because:
- The repayment is not guaranteed and is conditional
- Neither is the full repayment above the principal loan amount certain
- The debt is waived after a certain number of years
- Upon death, the loan is waived
From a Fiqh perspective, it is a Qardh (loan) with a Shart Fasid (irregular clause) of repaying an excess in the form of interest. In Tabarru’ contracts, an irregular clause is considered laghw (meaning it does not have legal effect at present) although the clause will be impermissible to stipulate nevertheless. Interest is charged.
In terms of getting a student loan, there are Shariah considerations and commercial considerations. In regard to the Shariah considerations, one should:
- Save oneself (or one’s parents) should save for the education
- Work and pay if possible
- Seek bursaries and scholarships
- Apply for Zakat funding
- Get a halal interest-free loan
If none of the above is possible, Shaykh Abdur Raheem Limbada gives a fatwa on what to do if the above are not possible. His fatwa can be seen here:
The commercial arguments against student loans can be seen here by Mohsin and Ibrahim:
3. Repaying student loans
If one has the financial means to pay off a loan and will not be put under any difficult scenario, one should pay off the loan. If the repayment of the entire amount is not possible, then one may adhere to the current plan the creditor permits for repayment.
I would encourage students who take the loan to do Istighfar and seek Allah’s forgiveness. This issue is an extremely perplexed matter and due to the lack of alternatives, it becomes all the more confusing and unclear. Try your best to acquire alternative financing or if you are student, advocate and work hard for there to be a Sharia compliant alternative for others. That will be a huge service.
Allah knows best