HECS = Riba?

Bismi llāh, wa l-ḥamdu lillāh, wa ṣ-ṣalātu wa s-salāmu ‘alā rasūli llāh, wa ‘alā ālihī wa ṣaḥbihī wa man wālāh. Ammā ba‘d:

You guys know of the HECS-HELP loan, right? The "interest-free" loan that the Federal Government grants to Australian university students. The one about which the Government says: ‘There is no real interest charged on HECS‑HELP loans. However, your debt will be indexed each year to reflect changes in the Consumer Price Index to maintain its real value.’ (Source)

‘Indexing my loan to ensure it maintains its real value? There's sure nothing wrong with that, right? I mean it isn't ribā (interest)...,’ you might think.

Have a read of the following:

• Interest in Student Loans and Inflation – Fatwa by Mufti Muhammad ibn Adam al-Kawthari
• HECS-HELP Loan – Fatwa by Mufti Faizal Riza and Darul Ifta, Darul Ulum Karachi
• Predicament of HECS loans: Interest or Not? – Two-Part Article by Sister Bint Nuh based on a course conducted by Shaykh Tawfique Chowdhury
• Is an Indexed Loan Akin to Unlawful Usury – Fatwa by Ustadh Tabaraze Azam

To quote from one of the above fatwas: ‘The basis in loans is that you need to pay back the exact amount borrowed, regardless of its value on the day it is owed.’ End quote.

To quote from another one: ‘There is a principle in Islamic Jurisprudence which says: “Consideration is given to the substance of the transaction and not the terms used.” [...] Whether we call it inflation or something else, the reality is that it is exchanging money for money with more from one side which is Riba and unlawful.’ End quote.

So from all the above, I guess the truth of the matter is unfortunate: the HECS loan is one that involves ribā.

I have found no sheikh (both online or in person) who has allowed these types of loans.

‘Oh wow Akhī, thanks a lot, now I can't go to uni. I'm gonna have to be a plumber for life now.’

No, no , no... Not saying that you can't go to uni! However, it looks like the only option would be to pay with hard-earned money (unless you can organise a halal loan). Yes, easier said than done. But I guess this dunyā wasn't meant to be easy. It was meant to be a test. As the ḥadīth narrated by Muslim goes, ‘This world is the believer's prison and the non-believer's paradise.’

Also, read the third link above; it goes into how to pay off uni fees and HECS debts without getting into ribā.

Now, I think a few points could be worth understanding:

1. The purpose of our existence is to worship Allah. Thus, we should make everything in our life for the sake of Allah. Everything.

So our eating should be for the sake of Allah. (e.g. I'm eating because Allah has obliged me to take care of my body; also so I can worship Him.)

Our sleep should be for the sake of Allah. (e.g. I'm sleeping so I can give my body rest to worship Allah tomorrow.)

Our recreation should be for the sake of Allah. (e.g. I'm relaxing so I can re-energise myself to serve Allah.)

And so our studies should also be for the sake of Allah. (e.g. I'm studying so I can give benefit to society, something that Allah loves; I'm studying so I can help the ummah; I'm studying so I can get myself a job that will be sufficient for me to build a family based on dīn; etc.) (By the way, this is good job advice for those confused about what career path to choose: Which job will be of most service to society?)

So, if we're going to study for Allah's sake, it should follow that the means by which our studies are supported should be in accordance with what Allah has legislated for us. And so that means that the money we pay to fund our studies should be halal. And that, unfortunately, means no HECS.

2. Halal money is more blessed – it has more barakah – than ḥarām money, without a doubt. So it may be that you get an awesome degree that is tainted by ḥarām money, and so as a result you don't end up finding a job. And when you do, you find that it's just not enough, or that the job is just so awful. Whereas you may get a not-so-awesome degree that was paid for with halal money, though as a result, you earn an awesome job that's more than enough and satisfying for you. So have a think about that.

3, The punishment of ribā is huge – Allah tells those who do not refrain from ribā to prepare for war with Allah and His messenger (ﷺ). Imagine war with Allah! Not only with Allah, but with His messenger (ﷺ)! There are also ḥadiths that mention that ribā is worse than zinā with your own mother! Would you want to risk a few years of supposed education for the possibility of an immense punishment in the Hereafter? Lā ḥawla wa lā quwwata illā billāh.

4. Yes, forgoing HECS and paying off uni fees with money earned via blood, sweat and tears is going to be tough. But remember, the greater the struggle, the greater the reward. So where would you rather have it easy: in this temporary dunyā, or in the everlasting ākhirah?

We ask Allah, the All-Wise, the one who knows what's better for us than we do, to keep us firm upon His perfect and complete religion, and to purify us from the ḥarām.

And Allah alone gives success.