My client was refused IBJSA due to his wife's deemed income from a student loan. However wife did not apply for the loan because Islam prohibits payment of interest. Cl went to a tribunal (unrepresented) and argued that regulation was a breach of article 14 of Human Rights Act as discriminated against practising Muslims.

The tribunal has decided that there was no discrimination that breached any article in the Convention - the only one that might have applied was Article 2 (the right to education) but in the tribunal's opinion this right was not breached as the wife could have funded herself by other means, e.g.part time work, and also the right was to education not funding for education.

Having looked at the info on HRA in the handbook I'm inclined to think the tribunal is right, but would welcome comments as have no experience of this! Ruth C

Interesting! I'm afraid I haven't come up with an answer to your specific question on HR implications and I'm afraid I'm not overly optimistic that the argument is sustainable, but i have come across the following article which was on the Queen mary University of London advice pages which can be found at:
http://www.welfare.qmul.ac.uk/money/sharia.html
I'm no expert on this but it seems arguable that student loans might not infringe sharia laws on riba (interest payments) because the interest is charged at the rate of inflation and is not charged to make a profit althoug it does seem to be more of a question of individual belief. Might be worth highlighting this to your client if they have not already considered the issue.


Article follows:






Islamic Sharia law prohibits "Riba", which means the paying and receiving of interest for profit. The prohibition is usually applied to excessive or unreasonable interest, but some Muslims believe it applies to all interest, including the inflation-only interest that is paid on student loans for undergraduates, as well as the commercial rates of interest paid on a Career Development Loan, Professional Study Loan, bank overdraft or credit card.

We have prepared this page of information for undregraduate and postgraduate Muslim students who need to finance their education, but who also have questions or concerns about Sharia compliance. The issue has been highlighted this year, because new undergraduates in 2006/7 now have the option to take a tuition fee loan, as well as a maintenance loan to pay living costs.

Interest-free overdraft facility
Loans for study
Sharia-compliant financing


Interest-free overdraft facility

Most UK banks offer home undergraduates a student bank account with an overdraft facility which is interest-free up to a specified limit. The same bank may charge non-students interest on an overdraft. In answer to a question about student overdrafts on the Islam Online website, Dr. Monzer Kahf, economist and Islamic scholar, advises that using such an interest-free overdraft is permissable "in spite of the fact that the bank is conventional and deals with other people on interest basis. What matters is your relation with the bank." Read the whole article

Loans for study: Riba or not Riba?

The UK government offers eligible undergraduate students a maintenance loan. For new students from 2006/7, they also offer eligible students a tuition fee loan and a maintenance grant. Sstudent loans incur interest on the repayments, but this is set at the rate of inflation, not at a commercial rate. Therefore, the value of the amount repaid is the same as the value of the amount borrowed.

Islamic Opinion is divided on whether this sort of Student Loan constitutes Riba. In response to a a query about student loans on the Central Mosque website, Muhammad ibn Adam al-Kawthari of Darul Iftaa, Leicester, says that he believes it is Riba. He advises that "when a loan is paid back, then the rate of inflation is not considered according to Shariah. One can only claim back exactly the amount which was given as loan." Read the full query .

However, a similar discussion on the Understanding Islam website concludes differently, and asserts that inflation-only interest does not constitute Riba: "if a person demands his principal amount in real terms, that is if he demands the same purchasing power which he had initially lent, such adjustment shall not fall under the head of Riba, and would therefore, not be prohibited." Read the full discussion .

A spokesperson for the Department for Education and Skills, quoted in an article in The Guardian in April 2004 said: "We appreciate the Muslim position on borrowing. But, it is important to remember that student loans do not incur a real rate of interest and the government does not make any profit out of these loans. The uptake of student loans amongst Muslim students compares favourably with other groups." Read the full article

Medical and dental students often need to take a Professional Study Loan (PSL) from their bank, which does attract a commercial rate of interest. Postgraduate students may need to take a Career Development Loan (CDL) or other form of bank loan, and again when repayments start at the end of your course, you will commercial interest will accrue.

If you consider the interest on a Student Loan to be Riba, or if you have to take a PSL, CDL or other loan, it is important to know that Shairah law still does not necessarily prohibit you from taking the loan. Dr. Muzammil Siddiqi, former president of the Islamic Society of North America (ISNA), has advised that where it is crucial to a student's education, they may choose to take a loan even if you conclude that it does include Riba. He is quoted in reply to a question about UK-style Student Loans on Islam Online:

"..if a student is in dire need to pursue his/her studies and no loans are available without interest, then in that case, under the rule of necessity, it will be permissible for the student to take the minimum loan and he/she should pay it back as soon as possible. This is of course, in the case when pursuing that field of education is also very important for the future of the Muslim student. But if a study is not necessary and it is only as a matter of enhancement of one's knowledge, then one should not take loans with interest." Read the full discussion

It is also important to understand that if you decide for religious reasons not to take a loan to which you are entitled, there is probably no specific Sharia-compliant alternative. Moreover, refusing the loan may have an effect on your eligibility for other sources of funding:

The Access to Learning Fund only accepts applications from those who have taken their mainbtenance loan entitlement
Banks often want to see evidence of a loan before opening a student account with the interest-free overdraft facility
Some trusts and charities specifically exclude students who are entitled to a loan, whether they have taken it or not
If you are entitled to claim benefit as a student, the Benefits Agency will assume you have taken your loan entitlement and will reduce your benefit entitlement accordingly
Sharia-compliant financing

HSBC and Lloyds TSB have Shariah-compliant financial services. For more information, visit the banks' websites :

HSBC: Amanah range of services
Lloyds TSB: Islamic Financial Services
The Islamic Bank of Britain offers sharia-compliant Personal Finance for a range of reasons for which you may need to raise funds, including education. You would need to open a current account at the bank, for which you would be credit scored, and you need to show that you have an income from work (part-time work included). For more information, visit the Bank's website or the call into your nearest branch. The nearest branch to QM is at 97-99 Whitechapel Road, London E1, and there are also branches in Southall, East Ham and Bayswater.

Another thought

The income not applied for rule comes from Reg105(2) of the JSA regs which state:

"..income which would become available to the claimant upon application being made but which has not been acquired by him shall be treated as possessed by him but only from the date on which it could be expected to be acquired were an application made"

So, assuming client believes student loans are contrary to Sharia, is it feasable to get round Reg 105 by applying for the loan and aquiring the advance, but then repaying it imediatley before it incurs any interest? Of course you might then be into the realms of deprivation, but if you could argue it was deprivation of capital rather than income, it would presumably be under the lower capital limit and hey presto..the problem disappears. Or am I talking out of my hairy behind again?

Also came across this advice on islamonline.net. Again a bit off the topic of HR but could be of interest especially re my above post on reg 105

http://www.islamonline.net/servlet/Satellite?cid=1119503547380&pagename=IslamOnline-English-Ask_Scholar%2FFatwaE%2FFatwaEAskTheScholar

Sorry, don't know how to tidy up the link!

On the face of it this sort of makes sense, however the Student Loan regs are illogical!

I read the regs as though regardless whether or not a student chooses to use the Student Loan as an income the Bens assessor should treat it as such for the duration of the academic year. No provision is given in my mind for whether or not the student chooses to blow it all on booze, repay it or use it gradually in place of an income. Don't think you'd be able to swing the capital idea. Best of luck trying though!

Yes, having thought about it again, it would more likly be a depravation of income issue, meaning, in effect, you are left with the same problem. On reflection I think this is a dead end. Oh well.