Higher academics are undeniably expensive in the United States. That’s why most students seek financial help or loans from trusted lenders and pay them back with interest. So, student loans are a feasible way to pursue education but are not suitable for Muslim students.
Since almost all student loans take interest on the capital amount drawn, they are considered ‘haram’ by Sharia law. Sharia law prohibits the payment of interest on loans, riba. Islam strictly bans riba as it helps businesses and wealthy people make more money while comparatively less-wealthy people have to suffer. You might be looking for halal student loans USA as a Muslim student.
Halal means lawful, according to Islam, and halal student loans indicate that borrowers don’t have to pay interest on the principal drawn. However, finding a halal student loan in the US is quite difficult. Most banks and financial institutions charge interest even if the institution is labeled as Islamic.
Let’s learn more about halal student loans and how you can manage your finances as a Muslim student.
What Do You Mean by a Halal Student Loan?
According to Islam, ‘halal’ refers to something permissible or lawful. Sharia-compliant finance says that a loan is halal if the financial bank or institute shares in the profit and loss of the borrower.
As you already know, Islam strictly prohibits interest. So, Muslim students are obligated to take only student loans that don’t charge any kind of interest. In other words, Muslim students can only apply for halal education loans.
Numerous Islamic institutions offer halal student loans for Muslim students in the United States. Only a few of them offer halal student loans without interest. Whereas other institutions make repayment easier and less haram by offering the following facilities:
- No penalties
- Lower fees
- Longer repayment period
On a related note, Islamic financial institutions don’t use the word ‘interest’. Instead of that, they use ‘fees’. Still, is a student loan haram? Some people argue that a student loan isn’t a haram since:
- Education is a necessity.
- Student loans come up with interest rates that track inflation.
On the other hand, some consider student loans as haram due to the following facts:
Student Loans aren’t a Necessity Anymore
A handful of Muslim students think education loans are the only way to complete their degree. At the same time, others don’t mind taking a gap and earning extra money to save up for their education expenses for the next academic year. On the other hand, some prefer working while studying instead of funding education with loans that can incur riba.
Education Loans Can Charge Higher than the Inflation Rate
Some Muslims consider it acceptable if the paid interest is equal to or lower than the inflation rate while paying back the loan. However, student loans can charge higher interest rates than the inflation rate, and it’s a haram.
Student Loans Can Still Provoke Riba
Student loans need only be paid once the browser starts a specific amount. Still, student loans can incur riba because the interest builds when somebody takes the loan. So, you must pay more interest if you take longer to repay the loan.
Interest-Free Student Loans in the US
Halal student loans are very rare in the United States. However, student loans at a bargain interest rate of 4.6% are available in the country for Muslim students. Otherwise, you can search for charities and institutions that offer interest-free loans to students.
Thus, you have to repay only the amount borrowed from the institution. Let’s check out some options that can help you with interest-free or halal student loans USA:
Massachusetts’ No Interest Loan
Massachusetts colleges can lend up to $5,000 to students. However, the student must be a permanent resident of the same state and a Muslim undergraduate. So, you can apply for this loan if you qualify for these terms.
Abe & Annie Seibel Foundation Funding
If you live in Texas and attend Texas colleges, this foundation might help you. The Abe and Annie Seibel Foundation offers a loan of up to $6,000 to local students. However, the foundation has no website right now. Still, you can contact them at (409) 770-5665.
Central Scholarship Bureau of Maryland
Around 150 Marylanders can take advantage of the loan offered by this institute every year. Central Scholarship Bureau of Maryland offers a loan of up to $10,000. On a related note, you must find an adult cosigner to get the loan. The cosigner has to commit to repay the loan. This can be a perfect suit for you if you are searching for a halal student loan.
Military Officers Association of America Scholarship Fund
If you are a child of an active or retired military person, then it’s a good financing option. The Military Officers Association of America Scholarship Fund arranges a loan of up to $5,500 for almost 1,500 qualifying students. Apart from being a child of a military person, you must have a grade point of a minimum of 3.0. In addition, the deadline to apply for the loan is March 1.
Leo S. Rowe Pan American Fund
If you are an abroad student and want to pursue your academics in the US, this organization can assist you. Leo S. Rowe Pan American Fund provides loans of up to $7,500 to around 70 citizens of Caribbean nations or Latin American countries. The best part about this fund is that you can apply for their yearly loans.
Scholarship Foundation of St. Louis
Are you a low-income Muslim student in the US? Then, you can contact the Scholarship Foundation of St. Louis. However, you have to be a resident of the St. Louis area. The foundation offers a loan of up to $5,000 to almost 600 low-income students. On top of that, you have to apply between November 15 and April 15.
Alternatives to Education Loans for Muslim Students
Student loans are mostly haram as banks and other financial institutions charge students. Undeniably, student loans can make your academic expenses much smoother but there are other options. For example, as a Muslim student, you can ask for financial help from your friends, family, and other people in your community.
Otherwise, you can save up before you attend a school or university. Additionally, you can join a school and live at home. So, you must ensure that you get into a university close to your residence. Moreover, you can apply for scholarships to reduce tuition fees and other educational expenses.
On the other hand, reconsider whether you need the degree. If the degree is extremely necessary, you can take a year gap and work. The savings will help you start your academic career next year. This addition to your resume will work in your favour.
Wrapping up…
Finding halal student loans is getting tougher day by day. If you have already taken out a loan, you can start paying it off as soon as you realize it is haram. Well, you can accelerate the payments to eliminate the haram arrangement. However, Islam still thinks that a student loan is a haram. Therefore, you can try the alternatives mentioned above to finance your education in the United States.
