Students Loans in the USA and Defynance?
Question:
Do you know of any student loans in the USA besides Defynance?
Answer:
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
Answer:
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
We apologize for the belated response.
Your question refers.
We applaud you for your sincere intention (Niyyah) in ensuring your financial dealings are shariah compliant. May Allah Subhanahu Wa Ta’ala grant you the means to earn a shariah compliant income. Ameen.
With regards to your specific query, there are a number of different forms of student loans available in the market. The fundamental and inherent nature of all of these solutions is that of Riba and interest. The financial construct of a student loan is designed as a pure conventional loan with interest charges. We understand that some student loans charge interest at the initiation and execution of the contract. That is impermissible and you should seek to discharge yourself from such a loan. This could be done by swapping the loan with an interest free loan (Qardh Hasanah) with a family friend or associate. You could also convert the student loan to a student loan with a grace period so that you can pay off the principle before the accrual of the interest charges. If you cannot do so as you stated above, then we advise you to make Istighfaar, give Sadaqah and commit to abstain from interest and conventional transactions going forward. However if you procured a student loan which charges interest after a fixed timeframe, then you may conclude your tutelage and study and pay off the student loan before the accrual of the interest charges.
With regards to your specific question on student loans in the USA, we have not come across any shariah compliant student loans. You also quote the defynance solution. We understand that defynance is a USA based student lender based on the ISA/income sharing model. Essentially you as the student agree with the vendor partner to contribute a percentage of your income over a fixed period. We have not reviewed the underlying terms and conditions and hence cannot issue a specific ruling on this issue. However the general model is not shariah compliant since one would be fixing a cap to the potential income ratio. Moreover the ISA model resembles a loan with a variable rate of interest. Essentially the student loan provider pays the university the student debt on behalf of the student.
The issue of student loans requires more attention and careful consideration from the Muslim World including Islamic finance practitioners who could seek to structure a suitable shariah compliant alternative scholarship funding mechanism in line with shariah laws of business, finance and economics. The scholars and business leaders can seek to develop a Shariah Waqf fund to finance these students or develop an Ijaraha Mushtarakah scheme with a learnership structure, etc. We would be willing to assist the Public in devising such a shariah compliant scheme to ensure the future stability of our educational foundations.
And Allah Ta’āla Knows Best
(Mufti) Ismail Desai
Chairman of Shariah Board and Fatwa Committee,
Darul Iftaa, Durban, South Africa
DISCLAIMER: The views and opinions expressed in this answer belong only to the author and do not in any way represent or reflect the views of any organizations to which he may be affiliated with. The opinions and educational information proffered in this communication are based on the jurisprudential understanding and available knowledge of the author. Given that contemporary issues and interpretations of contemporary issues are subjective in nature, another scholar may reach different juristic inferences and conclusions to those as expressed by the author. Whilst every effort has been taken to ensure total academic integrity and honesty, the author is open to corrective measures based on sound academics and juristic inferences. The Shari’ah ruling given herein is based specifically on the specific scenario in question. The author bears no responsibility towards any party that acts or does not act on this answer and is exempted from any and all forms of loss or damage. This answer may not be used as evidence in any court of law without prior written consent from the author. Any or all links provided in our emails, answers and articles are restricted to the specific material being cited. Such referencing should not be taken as an endorsement of other contents of that website.
(Announcement: The Darul Iftaa under the auspices of the Mufti Ebrahim Desai Foundation is managed by Mufti Ismail Desai Saheb, son of Hazrat Mufti Ebrahim Desai Saheb RA. Mufti Ismail Desai will continue his academic career by conducting an intensive one year specialist programme in Islamic Finance, Banking and economics (MA) and Iftaa training programme for Ulema and Shariah graduates. Mufti Ismail Desai Saheb will also be conducting various programmes for the public on Islamic Finance, Ishaahi Majlis and general Islamic Q&A. Alhamdulillah the Darul Iftaa currently has over 50 students from over 32 countries globally. The Darul Iftaa will be conducting programmes on Islamic Finance, Business and Economics in various cities/countries. The programme is conducted free of charge and you can request an event by contacting us directly at www.shariahbusiness.com. You can contact the Mufti Ebrahim Desai Foundation for any details on Hazrat Mufti Ebrahim Desai RA at www.muftiebrahimdesai.com. We will keep you updated on our programmes and events via our email data base and other media channels)
and Allah Ta'ala Knows Best
Mufti Ismail Desai
Darul Iftaa
Durban, South Africa
Disclaimer The views and opinions expressed in this answer belong only to the author and do not in any way represent or reflect the views of any organizations to which he may be affiliated with. The opinions and educational information proffered in this communication are based on the jurisprudential understanding and available knowledge of the author. Given that contemporary issues and interpretations of contemporary issues are subjective in nature, another scholar may reach different juristic inferences and conclusions to those as expressed by the author. Whilst every effort has been taken to ensure total academic integrity and honesty, the author is open to corrective measures based on sound academics and juristic inferences. The Shari’ah ruling given herein is based specifically on the specific scenario in question. The author bears no responsibility towards any party that acts or does not act on this answer and is exempted from any and all forms of loss or damage. This answer may not be used as evidence in any court of law without prior written consent from the author. Any or all links provided in our emails, answers and articles are restricted to the specific material being cited. Such referencing should not be taken as an endorsement of other contents of that website.
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