Paying Back the Governmental Student Loan With Interest

CategoriesTrade, Business & All Things Money [558]

Fatwa ID: 05297

 

Answered by: Mufti Eunus Ali

 

Question

 

I live in Australia, and we can have the government pay our university fees whilst we study. When we graduate, we then pay the government 125% of what they paid for us during our studies.

 

Is this considered interest or just a profit? We never get the money, the government just pays the uni on our behalf. And then we pay the government at a later date. If we got given the money and then had to pay back 125% I know that would definitely be interest, but I am wondering if it is also interest in this case.

 

 

In the name of Allah, the Most Beneficent, the Most Merciful.

 

Answer

 

When the student agrees to or applies for the government or any other finance body for a student loan, it is the student appointing them as their representative to pay the tuition fee on their behalf to the university which the student will later payback.

 

Hence the above will be considered as ‘interest’ and not profit as it is a loan that will have to be paid back at a higher rate.

 

Therefore this method needs to be avoided.

 

A possible alternative could be that one borrows money from family and friends to pay for tuition.

 

 

 

Only Allah knows best

Written by Mufti Eunus Ali

Checked and approved by Mufti Mohammed Tosir Miah

DarulIfta Birmingham

 

 

 

 

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