The UK student loan system, introduced with a sharp rise in tuition fees in 2012, was met with widespread concerns about the potential impact on young people from lower-income backgrounds. However, thanks to the income-contingent student loans system, fears that students from disadvantaged communities would shun higher education were largely unfounded. Yet, a less publicised but significant issue has persisted: the impact on Muslim students who, due to religious beliefs, feel compelled to avoid loans that they perceive as involving riba—an Islamic term often translated as usury or economic exploitation.
According to the 2022 Muslim Census Survey, the UK’s Muslim community, which represents about 12% of all students—approximately 45,000 annually—faces unique challenges under the current system. The survey revealed that around 6,000 Muslim students each year decide against pursuing higher education due to religious concerns about loan financing, while another 6,000 self-fund their studies, often experiencing reduced choices and heightened stress. Additionally, 80% of Muslims who took out loans reported feelings of internal conflict, with many opting to forgo the optional maintenance loan, adversely affecting their standard of living and academic performance.
Earlier this year, the British Board of Scholars & Imams (BBSI) offered a new perspective by reclassifying student finance as a tax rather than a loan, a move that has provided reassurance to observant Muslim students and their families. While the notion that interest on loans equates to usury is not unanimously held among Islamic scholars, a growing consensus, including notable figures like Yasir Qadhi, now deems UK student loans permissible. This aligns with the BBSI’s recent guidance, which mirrors the efforts of campaigners such as Martin Lewis, who work to reshape public understanding of the student loan system.
Despite the perception of loans as debt with compounded interest, the reality is far from this view, particularly within the UK’s income-contingent repayment system, where only the top 17% of earners are expected to repay their loans in full. However, the government’s reluctance to reframe these loans as a form of tax—due to fears of negative political fallout—has kept this misconception alive, contributing to ongoing hesitation among some of the most marginalised groups.
The BBSI has advocated for the introduction of Shari’ah-compliant Alternative Student Finance (ASF), an approach that ministers previously promised to explore. Although well-intentioned, the push for ASF seems redundant given that the current system functions similarly to a graduate tax. Moreover, ASF may attract erratic demand over time, even from non-Muslim students, complicating its intended purpose.
Rather than creating alternative systems, efforts would be better spent on educational initiatives that accurately portray student finance as a graduate contribution rather than debt. This approach, supported by updated information on university and advisory websites, could help reshape perceptions across the board, encouraging more students—including those from the growing Muslim community—to pursue higher education.
In light of ongoing financial pressures on universities and frozen fees, the UK’s student loan system remains a relatively progressive way to fund education compared to alternatives in other countries. Universities, government advisers, and relevant stakeholders should actively work to promote this model as a fair, income-based system, helping to dispel misconceptions that have long clouded public understanding.
For more updates on the UK student loan system and insights into its impact on diverse communities, visit EyeOnLondon for the latest coverage and analysis.
