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Ruling On Student Loans


Praise be to Allah

With regard to student loans, they must fall into one of three categories:

1.

Where the loan does not involve riba, and the student pays back what he took, without any interest. In this case it is permissible to take this loan, and there is no problem.

2.

Where the loan involves riba, and the one who takes the loan is required to pay back the loan with interest. In this case it is not permissible to take this loan, because it is riba.
3.

Where the loan does not involve riba originally, but in some cases it involves a riba-based condition, such as when the student is told: This loan is to be paid back as is, or it is a grant to you if you pass all your exams, but if you give up studying or fail, or you delay repaying the loan beyond the stipulated period, you will have to repay the loan with interest at a specific rate. In this case it is also not permissible to take that loan, even if the borrower is determined to succeed or is confident that he will not have to pay interest, because this contract involves approving of the riba-based condition, in addition to the possibility of falling into it, if circumstances arise that lead to him not succeeding or not completing his studies.

And Allah knows best.

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