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Are student loans Haram? watch

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    Surah Al-Baqarah [2:275]: "Those who consume interest cannot stand [on the Day of Resurrection] except as one stands who is being beaten by Satan into insanity. That is because they say, "Trade is [just] like interest." But Allah has permitted trade and has forbidden interest. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allah . But whoever returns to [dealing in interest or usury] - those are the companions of the Fire; they will abide eternally therein"
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    You will get different scholarly opinions and it is a lot around ones interpretation of dharurah (dire necessity).

    It is a complicated matter. A lot of people will flat out say it is haram due to it's association with riba (interest). A similar issue occurs when it comes to mortgages.

    The reason why it is a complicated matter is, unlike hundreds/thousands of years ago, we live in a debt-based economy. Now a debt-based economy has a lot of pro's (as well as some con's), so a lot of countries now are debt-based economies - the strength of the model is that it provided expansion.

    In such a society, the whole concept of money is very different. The systems, expectations of how people fund their livelihood becomes very credit based.

    As such, in such a society, many things become unattainable without credit for the majority of the population. Education (tuition fee's) is just one, but so are houses. To avoid credit in this society, it would mean the following:

    1) Having to rent, instead of getting a mortgage. This may mean you will never ever own a property in your life time, as rent is quite expensive as it is. You also suffer economically compared to those who do take up the mortgage for many reasons, which I won't go into here. Also, you have different rights to your staying with renting, compared to owning. If you are a family and renting, it is possible there is a time you have to leave at short notice, which could trouble your family immensely.

    2) You may need to delay your studies for years, or depending on your situation, indefinitely. Should you delay your studies, it will likely affect your performance in such studies and also post-study opportunities. Amongst your peers, you are likely to be disadvantaged.

    If all Muslims avoided credit, you could argue they would be hugely disadvantages in life. This is why some scholars will permit it if you have exhausted all other lawful ways of financing your education/house (and some other life necessities that may come about, such as medical treatment).

    This permission is based on the assumption that education, shelter(housing), medical well-being is a basic skill for survival in today's world. Depending on interpretion, one might say the status of these become dharuah - and the rules of prohibition are relaxed in case of a dharurah (dire necessity).

    Taking out a mortgage for your own property which you are to live with your family, is quite different to taking out multiple mortgages for multiple properties that you plan to rent/sell for the purpose of gaining wealth. The main driver of why Riba (interest) is so abhorrent is that, it is a means for the wealthy to gain wealth by taking advantage of the poor. In the scenario's where you are just taking it out so you are able to do education like the rest of the population, or it being the only means to own your property, it can be excused. Similarly, taking out a loan to cover an emergency operation is very different to taking out a loan for cosmetic purposes.

    So really, the answer will come down to who you ask and your interpretation of dharurah. Many scholars may equally argue they don't feel this is dharurah, that you can move/live in another country, that you don't need to study at university, that the risks of renting are not dire.

    I do take the view that it is dharurah as it otherwise greatly puts muslims at a disadvantage and in these circumstances you are not out there to make profit, you are not taking advantage of the poor etc.

    The downside is that you could argue that you are supporting the system by letting others profit out of it, which is somewhat true - but then you look at money and as soon as money comes to your hand, it is already debt-based, To truly be against Riba , you should go further and argue you shouldn't take part in the economy as a whole, but who can do that?

    So as long as you are not earning interest, and only taking loans for things like education, health, and personal shelter, I think you are okay - but again, not all scholars will agree with this. Allah knows best.
 
 
 
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