Sharia student loans: Will Muslim students avoid paying interest on finance for higher education?

Government consultation now underway – with reports Muslims are divided on the issue

The Government is inviting responses to its consultation on whether or not to introduce a student loan that is compliant with sharia law, amid reports that the UK’s Muslim population is divided on the issue.

It comes after concerns were raised that the existing finance options on offer from the Student Loans Company were unsuitable for Muslims, with sharia law forbidding loans that involve the payment of interest.

Announcing the proposed new sharia-compliant scheme at the start of this month, the universities and science minister David Willetts said the loans would “ensure that anyone with the ability and desire can go to university”.

Under the new plans a special advisory committee would oversee a mutual fund pooling model (takaful), whereby those who have been to university and moved on to well-paid jobs help to pay for those who come along after them.

Funds would be withdrawn from the pool for prospective students, who would later make a series of repayments to pay for future generations.

The repayments would be set at a benchmark rate equivalent to that of conventional student loans, in a bid to alleviate the fears of some commentators that Muslim students would end up receiving a discount rate.

Yet in doing so the Government has been criticised for creating a scheme that is only superficially avoiding interest and hiding it behind the “smokescreen” of a fund pool system.

Sheikh Suhaib Hasan, from the UK Islamic Sharia Council, told BBC Asian Network: “By limiting the repayments to a benchmark similar to that of conventional bank interest rates, Sharia-compliant schemes I think are nothing but a smokescreen through which a prohibited matter turns into a permitted one, so it’s better to leave it as it is.”

But that solution will not provide an answer for people like Annesa Maryam, from Manchester, who was among 40 case studies collated in the past year by the Islamic organisation 1st Ethical.

She told the Guardian: “My religion has to be more of a priority to me than my education. It's a real shame, because just a couple of years ago [when fees were lower] I could afford to go to university without a loan. There is no way I could pay the amount needed now, coming from a low-income background.”

But Humarrah Sheikh, 19, said that for many Muslims the loans were not really that big a problem – particularly in comparison to the sheer amount of fees students are now expected to pay.

She said: “It hasn't been that big an issue for me, and I personally think that religion should be kept out of this area.”

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