University Grants and Students’ Loans in Western Countries
22-5-2023 | IslamWeb
Question:
السلام عليكم ورحمة الله وبركاته A person is in university and has got in due to taking a riba based tuition fee loan. There’s also free mixing that occurs in the Uni and other Har?m that he tries to avoid. If this person gets bursary/scholarship money from the Uni is this money halal? As he is a student due to paying a riba based loan and he is in a mixed Uni, so would the money be Har?m?
Answer:
All perfect praise be to Allah, The Lord of the Worlds. I testify that there is none worthy of worship except Allah, and that Muhammad 
is His slave and Messenger.
The basic principle of scholarships granted by universities to some of their students is permissibility, just as the principle is the prohibition of usurious loans, whether they are loans to students or others, as they are considered explicit usury. However, this does not mean that whoever takes a usurious loan is forbidden from taking scholarships; rather, he is permitted to take them if he meets the conditions set by the university for scholarship holders.
However, we point out that some contemporary jurists, who research the new matters of Muslims in the West, permitted this type of loan for students who did not find permissible ways to obtain studies.
The decision issued by the Assembly of Muslim Jurists of America (AMJA) regarding student loans reads:
* The basic principle is the prohibition of usurious loans, whether they are loans to students or others, as they are included in evident usury, which the former and contemporary scholars unanimously agreed on its prohibition. One’s utmost effort should be made to seek legitimate alternatives before jumping to reasoning with necessities and needs.
*In the world of universities in the West, there are scholarships for the talented and the incapable, in addition to part-time job opportunities that enable a person to combine between study and work and prevent falling into these loans. There may also be good loans; the state guarantees their interest payment if the student can pay off everything he owes within six months of graduating. Or grants from some companies and organizations in return for contracts to work with them after graduation, so one should make every effort to do so.
*If all these alternatives do not exist, and interest-based loans are necessary as the only way to facilitate university education at all times or at the beginning, or as a way to secure the needs of Muslim communities for the indispensable crafts and industries, then it becomes a necessity that eliminates the sin of usury, even if the ruling of prohibition remains, provided that the one who is compelled does not transgress, and that is by evaluating the necessity as it should be valued, while always being keen to seek legitimate alternatives, and getting out of these usurious loans at the first opportunity in order to reduce the interest as much as possible. We emphasize the need to refer to the people of Fatwa in assessing these needs and necessities, and that no one should rely on himself in that or measure his needs against the needs of others. [End of quote].
Allah knows best.