An Islamic approach to student loans

Islamic Finance Guru Ibrahim Khan says students must do everything they can to avoid taking out a haraam student loan. As we all know, the good old government has whacked students with a £9,000 annual tuition fee for going to university. Fun, fun, fun. George Osborne will have his joke. Unfortunately for Muslims this policy change is not only an economic challenge it is also a moral one, because as we all know Islam forbids dealing in interest and the student loan is unambiguously an interest-based loan. Student loans in general carry a risk with them as they have, in turn, created a rise in student loan fraud. Muslims across the UK have reacted differently to this issue but there are roughly three main camps in which students fall into.

1. Someone who has decided not to go to university because they want to avoid riba
2. Someone who has taken out a student loan but is really not happy about it
3. Someone who has taken out a student loan and is chilling

I will argue that we should be either falling into camps (1) or (2). I will unfortunately also be arguing that most Muslim students in fact fall into camp (3). Too many Muslim students are chilling at uni. Is a university education a necessity or a need? The distinction between “dharoorah” or necessity and “haajah” or need, is that dharoorah applies for particular individuals in their particular case, and haajah applies for a community more generally. On student loans, fatwas like this focus on the haajah aspect while fatwas like this focus on the dharoorah aspect. The case from the point of view of dharoorah is relatively straightforward. It is perfectly possible to live a healthy, relatively prosperous, and decent life. Even if you don’t get a university degree you will survive. It’s not a choice between (a) go to university and (b) become a beggar.

However, this approach adopted rigidly misses the obvious implication that if you let no one go to university then within the course of a generation we won’t have Muslims who have had the benefit of higher education. And that would be a complete, unmitigated disaster. Granted some may try the online education approach. It may be difficult but they are trying their best to get a good education. It is unsavoury results like this which led to scholars like Ibn Taymiyyah allowing certain transactions which would cause a great deal of difficulty to the community as a whole were they to be banned. Individually he thought it was permissible for several people to not have to resort to these transactions, for a community as a whole it would be impossible. Let’s consider for a moment the impact of telling people not to go to university. We know that higher educational attainment correlates with better pay, more likelihood of rising to a leadership role in society, better health, lower crime rates, and a whole host of other positive factors. Check out these two articles for more here and here. We also know that 46% the Muslim community in the UK live in the 10% most deprived areas of the UK. We are only 5% of the population but our homeless numbers are more than double the national average and our prison population is three times the national average. However, we’re massively underrepresented when it comes to Russell Group universities, top tier management, and civic leadership. On top of this we know that degrees affect marriage prospects, settling down with a family, and a whole host of other social issues. I feel the results are pretty clear. As a community if we are going to improve conditions we must get the best education possible – in all fields. For those individuals with the aptitude to go on to university, they should, even if it means taking out a student loan for it to be humanly possible. An employer student loan repayment program has been developed to help ex-students pay off what they owe, but this is more of a marketing tactic to entice young people to work with a business However, these comments should not be misconstrued. I’m not calling for silly season on student loans. Read on. Are there any alternatives to taking out student loans? Riba is haram, haram, haram. It is absolutely not something to be taken lightly and no one should be taking out a student loan without consultation with a reputable scholar who understands the UK context, and without trying your hardest to avoid it. And there are ways to do that, whether it be by considering if you can refinance down the like (with help from https://www.sofi.com/refinance-student-loan/ or other services for this), or if there are options on the table for you elsewhere. Firstly, you need to seriously think about why exactly you need a university education and what you are planning to do with it. Don’t just get a degree for the jokes. Don’t just get a degree to get a husband. Don’t just get a degree because all your mates are and living in halls will be a blast. And don’t just get a bad humanities degree at a nad university just to get a degree. Read this Economist article. It’s pretty clear that if you’re going to do a humanities degree at a bad university you’re probably better off not getting it – at least from a financial perspective. The only reason you should be getting a degree is because it is justifiable as a way of increasing your knowledge and your job prospects. Too many students are currently in it for the wrong reasons. Apprenticeships and vocational/part-time degrees are a real alternative that people just don’t consider but should. A number of very respectable firms – corporates too in fact – have been considering this and inviting applications from people without degrees. So things are really changing. Secondly, there are multiple bursary and funding organisations you can tap into if you are resourceful. I know of some individuals who were so good at securing bursaries that they managed to make a net profit every year! Now I don’t expect you to be that good, but seriously, hunt around. There’s always stuff out there for those who look closely. And plan ahead, so that the application for a bursary that you have to make in a year’s time is already on your radar. That way you know what you need to do this year to strengthen your application for it.

Thirdly, have you considered taking a couple of gap years and building up cash reserves before you go to university? I was from the lucky ones who got in when the fees were still £3000. But if I were going to university all over again this is what I would do. I would live at home and work full time for years, doing as much entrepreneurship on the side as I could, tutoring on the weekends, and build up a cash reserve of between £20-30,000 or more. Given that you will be living at home and even a basic salary will bring in £12-15,000 a year, I think that’s a very reasonable estimate. Taking this step also lets you clarify your thoughts about what you want to do and why. You are a more mature individual when you finally get to uni and you’ll manage your money better now that you know how hard it is to earn it. Fourthly, are you working whilst at university? There is such a plethora of freelance jobs out there if you just look. If you dedicated the first half of your first year to learning a skill like editing, graphic design, copywriting, blogging, coding, or whatever – the next 2 and a half years can be real money makers and on flexible working times too. Plus you can often structure your course so that you only have contact hours two or three days a week. The rest of the time you can work. Of course I know this is not possible for some degrees where the workload is heavier and contact hours are 4-5 days a week – such as medicine or dentistry – but I know if I honestly think about my time at university, heavens I had a lot of spare time! Fifthly, many people take gap years during university as well. This could be a very viable option. You can make this doubly effective by trying to secure a year-long internship in your relevant field so that you’re actually earning money and strengthening your CV at the same time. There’s no rush to finish your degree! Sixthly, holidays add up to around 5-6 months for university students. Granted you’ll want some of that time off, but even then that leaves around 4 months – a third of a year – to work and earn. Some students just work during summer holidays interning and they earn up to £8000 for just two months work. True story bro. So what do you right now as a Muslim student with a loan? Think very seriously about the ways you can use gap years, bursaries, and part-time work to pay for your degree. You can only really use the “It’s dharoorah bro” argument if you really are trying to your absolute hardest to avoid riba and if your degree is one that you genuinely cannot structure so that you can work and make ends meet. Write to your MP and let them now of your situation and why you want them to lobby for the Muslim Student Loan alternative (as campaigned for by the Halal Student Loans campaign) to be brought into law as quickly as possible. A halal alternative is on the way in the next few years but it needs to be regularly pushed and kept at the forefront of policymakers’ minds. Not a student but still want to do something? You need to lobby the government via your local MP as well. Sounds scary? Not really. Just go to this website and very easily write a letter to your MP. That’s all it takes. But we as a community need a sustainable and long-lasting solution to our economic problems – Islamic mortgages, banking, and loans. We need to resurrect the traditional trust fund structures – or awqaf as they’re called in Arabic – where a pot of money is donated to a charitable trust which then invests that money into profitable things like houses or shares, and the earnings from those assets is then used to help those who need it. But this kind of solution requires millions of pounds and hundreds of thousands of willing individuals. If you’re up for investing in the future of our community in the UK and/or have ideas of how this can work, or know of people who are doing this kind of thing already, comment on this article and let’s get this important conversation started. So there you are folks, remember to let me know your thoughts – student or non-student. I’m genuinely interested about how practical you think these steps are. This article first appeared on Ibrahim’s blog and you can follow him on Twitter @ibrahimkhan

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