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Halal Finance for Student Loans – FAQs

HomeHalal Finance for Student Loans – FAQs

Q: How much do students have to pay to attend university?

A: From September 2012, anyone wishing to commence a full time undergraduate degree at an English university will have to pay up to £9,000 per annum in tuition fees alone.


Q: What if students cannot afford these fees?

A: The Government has set up a Student Loans Company (SLC) which offers students interest-bearing loans to cover both the cost of tuition fees as well as living expenses. Please visit www.slc.co.uk for more details.


Q: Why can’t Muslim students take up these loans?

A: Many Muslims, for religious reasons, do not wish to pay or receive interest. This makes the conventional loan system highly problematic.


Q: What else is available then?

A: The Government Department for Business, Innovation and Skills (BIS), which oversees policy in this area, is developing an alternative model which addresses Shari‘ah concerns over interest. Please click here for an update. 


Q: What is the nature of the alternative model?

A: It is a version of what is known in the Islamic finance industry as a “Takaful”.


Q: Does this alternative model cost the same?

A: Yes, the alternative model replicates both the pricing and terms and conditions of the conventional model, as required by the law.


Q: Does the government propose to offer this alternative model through the SLC?

A: We believe this to be the case, subject to confirmation by BIS.


Q: Will the alternative model be available from September 2012?

A: No, although BIS have agreed the mechanics of the alternative model, they have not confirmed a date when this model will be launched because they first need to pass some legislation through parliament. BIS have advised this may take three or four years to sort out.


Q: Why does the government need to pass primary legislation?

A: The existing legislation covering the operation of the SLC only permits conventional loans. There is therefore currently no legal basis on which the SLC can offer the alternative finance model.


Q: Why can’t the government prioritise the passing of this legislation?

A: Well this depends on what the government’s legislative priorities are. By lobbying MPs, we believe we can make a strong case for the required legislation to be passed sooner.


Q: So what happens to those Muslims who want to go to university in the next few years, and are reluctant to take conventional loans from the SLC?

A: Firstly they should be at the forefront of our lobbying efforts to speed up the introduction of the required legislation.

In so far as what choices they have in the interim, they can either defer going to university altogether, work full-time and use the income to fund studying part-time or compromise their principles by going to university using conventional finance.

Please click here for the Al-Qalam Shari‘ah position on using conventional finance.


Q: Are there any Islamic banks offering funding for Muslim students?

A: The terms and costs of the loans offered by SLC are subsidised by the government and hence would not be offered by private banks.