Introduction
In the West, when students apply for universities, the university fees are so high that many take loans from the government, banks, or private organisations. But, as Muslims, we need to be careful about these types of loans because they usually contain Riba (interest). However, students need that money to further their education to live predictable financially stable lives. This article presents the Fiqh principles applied to this topic and then presents the opinions of scholars based on those principles.
Riba
Riba (interest) refers to any excess, increase, or addition that is unjust or exploitative in trade, business, or loans. Riba is forbidden in the Quran and the hadith. Allah said in the Quran: “…Allah has made selling lawful and has prohibited interest…” (Quran, 2:275)
There are different types of Riba. According to some scholars, the type of riba we are accustomed to is not known to the Jahili Arabs. They disagreed about the excessive pay from beforehand. Instead, when the time came for payback, and (if) the payer didn’t have enough money, the giver would take advantage of his misfortune and give him more time but increase the amount. This is the worst type to which Allah said:
“O believers! Fear Allah, and give up outstanding interest if you are true believers. If you do not, then beware of a war with Allah and His Messenger!” (Quran, 2:278-9)
But, generally, scholars say that the Riba, that exists in loans today, is a lesser form of Riba and it is Haram because it leads to the worst type which was mentioned above.
Ruling of haram things in necessity and need
Before jumping to the scholars’ opinions in this matter, it is important to understand the difference between the terms, ‘necessity’ and ‘need’, in Fiqh.
Necessity (ضرورة)
Allah states in the Quran: “He has only forbidden you to eat carrion, blood, swine, and what is slaughtered in the name of any other than Allah. But if someone is compelled by necessity—neither driven by desire nor exceeding immediate need—then surely Allah is All-Forgiving, Most Merciful.” (Quran, 16:115)
This ayah proves that, in a life-and-death situation, if you have no other option, then you are allowed to eat something which is haram otherwise. In essence, by unanimous consensus, the haram is allowed in dire necessities (life-and-death situations).
Need (حاجة)
The need is less urgent than necessity, i.e., it is not a life-and-death situation, but it is still a requirement which should be fulfilled. Some scholars say that when the need becomes general in society, it is treated like a necessity.
Scholars opinions
Haram
The first group of scholars hold the strict and straightforward opinion that it is Haram because it contains Riba, and Riba is prohibited in the Quran.
Permissible under some conditions
The second group of scholars, taking a broader approach, consider the ruling of haram things in need. They explain that if the level of need decreases (i.e., from a life-and-death situation to a general need), and the level of haram decreases (from the worst form to another), then it may become permissible. This is why they say that there’s no sin for a student to take such a loan because the need to be educated is a general need in society. Therefore, it is allowed for the student to take just as much as he needs for his education and pay it off as soon as possible. This is, of course, but with some conditions.
1- You cannot afford it otherwise.
2- You don’t have the option to take a non-interest loan from any other source.
3- You cannot get a grant.
Taking alternatives
There are alternative financing options available that comply with the Shariah. One such option is the income-share agreement (ISA), which is a contract between a student and an investor. The investor provides funds for the student’s education in exchange for a percentage of the student’s future income for a specified period after graduation. Another option is crowdfunding, where multiple investors pool their money together to fund a student’s education.
Conclusion
Allah said in the Quran: “So be mindful of Allah to the best of your ability” (Quran, 64:16). So, try to do as much taqwa as you can and think very carefully before going for student loans. It’s important to note that Islamic finance is a complex field, and the rules and regulations can vary depending on the country and the institution. It’s always best to consult with an expert in Islamic finance before making any financial decisions.
