Question:

_ Is it permissible to take HECS-HELP loan for higher education?

Answer:

In the Name of Allah, the Most Gracious, the Most Merciful.

In HECS-HELP loan, the debt is indexed each year to reflect changes in the Consumer Price Index (CPI). Indexing the debt to reflect changes in the CPI is not permissible according to Shariah, as it falls in the definition of interest.  Shaykh Mufti Taqi Usmani (May Allah protect him) has written a detailed treatise on this subject. (See: Buhooth fi Qadaaya Fiqhiya Mu’asaara: 1/169-196; Fiqhi Maqaalaat: 1/49-78)

Hence, it is not permissible to take HECS-HELP loan. [1]

And Allah knows best.

Mufti Faizal Riza
15/12/2011
Darul Ifta Australia
www.fatwa.org.au
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_[1] We had sent a query to Darul Ifta, Darul Ulum Karachi, Pakistan to get their view on the issue of taking HECS-HELP loan for higher education. They responded that it is not permissible to do so. This fatwa of Darul Ifta, Darul Ulum Karachi was approved by seven muftis of Darul Ulum Karachi, including Shaykh Mufti Taqi Usmani (May Allah protect him). Click here to download the fatwa (in Urdu). Hereunder is the translation of the fatwa:

Question:
Here in Australia, it is quite costly to study in a university. Without taking a loan, it is almost impossible for most students to study in a university. Therefore, to help the students, the government has a scheme whereby the government gives the students loan to pay for university fees; and the government does not charge interest on this loan. However, every year based on the changes in the Consumer Price Index, the government adjusts the amount payable by the student who took the loan. There are two questions regarding this:

1) Is the above considered to be interest (riba) in the Shariah?

2) Can it be permissible for students to take the above-mentioned loan if they are not able to study in a university without taking a loan? Please keep in mind that if Muslims don't study in universities, there will not be any Muslim doctors, scientists, engineers, teachers, accountants, etc.

Answer:
1) The scheme mentioned in the question is an interest-based scheme from the perspective of Shariah, as it is a loan; and in loans it is necessary that the debtor repays (the creditor) the same amount that he took as loan. If he repays more or less than the amount he took as loan, it will be counted as interest. And the change in the Consumer Price Index between the time the loan was advanced and the time the loan was repaid is not taken into consideration according to Shariah. Therefore, whenever the debtor repays the loan, he must repay the same amount that he took.

2) For a Muslim to take a loan under the scheme mentioned in the question with the condition that the debt amount will be indexed to reflect changes in the Consumer Price Index is not permissible. As for your statement that if Muslims do not study in universities then there will not be any Muslim doctors etc; the solution for this is that Muslims should take loans from other Muslims to pay for their university fees. Also, Muslims can study in the Muslim countries that uphold the teachings of Islam.

And Allah Knows best.

Darul Ifta, Darul Ulum Karachi