19 Jan 09 Student Loans…What’s a Muslim to do?
Many among us have experienced the headaches of student loans. For the fortunate few, they received scholarships or parents’ savings to pay for education. This post is not meant to answer any questions in regards to Ribah (usury). A complex topic that will have to be addressed at a different time. Rather, I’d like to explore a few of the alternative models out there and leave it to discuss. You maybe surprised with the alternatives.
Some of you may have listened to the Marketplace broadcast that discusses student loans and options for Muslims, it is certainly the case that there are very few options for Muslims and non-Muslims who do not want an interest bearing loan.
The following are examples that exist abroad or in specific localities that may not be easily accessible.
- IANA Financial a Canadian based Islamic non-profit, offers interest free student loans to Canadian students. That appears to be the only criteria set on their website. I could be wrong. It may only be for Muslims. They have the sole discretion to deny your application for any reason they see fit. The language is rather vague. From their website:
- In Great Britain, qualified students are offered government loans that are set at the rate of inflation that you can pay back over the life of the loan. There are several disagreements over the permissibility of this scheme you can find opposing opinions here and here.
- Also in Great Britain, Sharia compliant banks sell the student gold in the value of the loan they are borrowing. The gold is sold at market price and as part of the repayment program the student must pay back the value of the loan in addition to the new value of gold, presumably it would be higher than when the bank loaned it, as a result making a profit.
- Another idea being explored, this one a little more sketchy and less developed, proposes to “invest” in a student for a percentage of future earnings. I think there are many self evident problems with this model.
Are there special considerations to qualify for a loan? If so, what are they?
Yes! Special consideration is given to:
* orphans* widows
* people with a difficult financial situation
* women
* volunteers and local activists
* those who are proactive and value independence
What are Reasons for Loan Applications to be Rejected?
Loan Applications can be rejected for the following reasons:
* Incomplete application or missing supporting documents* Insufficient funding
* Guarantors unwilling to co-sign
* Disagreement in establishing payment schedule
* Other reasons deemed to be appropriate by Iana Financial
If you have any other models that you are aware of please share in the comments below. Also, True and Good Words has a survey for Canadians on creating a business model for interest free loans.
FYI, This is an American blog in case anyone got confused by the lack of American representation on this post.
Tags: iana financial, islam, Islamic Finance, ribah, student loans
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Subhan’Allah, this is a very critical issue for Muslims living in America who can’t afford to pay for higher education themselves. Despite recent interest in Islamic financing for homes and such, the loan industry for education is definitely lacking. This is all the more distressing when you’re talking about certain fields like medicine or law, which notoriously have some of the highest tuition rates in the realm of education. For those of us graduating with over $200,000 in debt, what options do we have? Granted, mortgages cost about the same… if we can fund those, why not education?
What’s the outlook for Islamic financing of education in the US?
Iana Financial is for everyone; it was founded and is being developed by Muslims.
We pray that Iana motivates others to look into various beneficial community-based initiatives.
Iana is still in its early stages; we expect to modify our procedures and practices as we learn and grow inshaAllah.
We appreciate all support, including comments and feedback.
Check our website often (and sign-up to our mailing list) for updates.
As-salamu Alaikum,
On Behalf of the Iana Team
Sharafe Elladen
asalaamualeikum
I am an Irish-American, muslim since 2002, currently applying to grad schools here in the U.S. for a master’s in ESL teaching. I was wondering if any options exist for halal lenders for student loans?
I appreciate any help brothers and sisters have to offer. Jazakallah khair
iskender
Unfortunately Br Iskender your options are quite limited.
You can try contacting University Islamic Financial Corp or Devon Bank, they may have updated their portfolio to include sharia compliant student loans. Good luck on your quest. Please write back here or contact me to post your story, whether you managed to find a loan or not. Insh’Allah it can be a benefit to others who have a similar experience.
Ahmed