Ribaa-Free Student Loans System



Curently, you have two methods of financing your college tuition.

  1. Either you saved up, your parents did or you won the lottery – simply not an option for a lot of people
  2. Take a student loan. Problem – the Qur’an (and Torah) say that usury/ribba is haraam. So…if you don’t have a sugga daddy, how do you manage?

How does a poor Muslim seek financial assistance in his education?
I thought of a method to finance student tuitions without incurring ribba. Ready?

Here’s how it works: Lets say you want a degree in Economics (my major). You find an investor who pays for your education, lets say $40k over 4 years. The investor then owns “stock” in your education and is entitled to dividends from your education. Once you graduate and get a job in your field, the investor gets 5% (or whatever rate agreed upon) of your income per year he owns the stocks.

As the student-now-worker, you can buy back the shares of your tuition at an agreed upon price between you and the investor. Obviously the investor will want to recoop his investment of $40k + inflation, either through the 5% dividends or re-purchase of the stock. So its up to you two to decide on prices, dates, et al.

You get your degree, investor gets a return on investment. Win/Win!

Benefits over Ribba Loans:

  • Not haraam…hopefully, I have to get it verified with a legit ‘Alim. Anyone got Mufti Taqi Usmani’s cell?
  • Guarantees legit degrees – You don’t major in, ahem, useless majors. Honestly, there are some majors that have little utility. If you’re getting an education for fun or social value, find your own means. But if its to make money, some majors simply have less value than others.
  • The student does not have to pay a debt, irrespective of his future income.
  • Investor has an incentive to help the student find the highest paying job, helping with resumes, asking his contacts, networking, etc.
  • Currently, the gov’t will give you a student loan even if your grades are F, F, D, and C (Zach Morris’s grades). So, a lot of people who, frankly, just aren’t cut out for higher education can rack up debt with no way to pay it off.
Risk is Spread: In usury-based loans, if you cannot get a job, you are still in debt. But in this system the loss is between you and

The downside:┬áThere are fields of study that are essential to set the “direction of society”, provide social commentary, and offer a scholarly voice on current issues. These require degrees in things like History and Sociology. Yes, these are essential for any community, but often result in low yielding incomes. This kind of degree would demand a different way of funding, maybe from a Waqf. Secondly, some people would not qualify for financing…but, this is not necessarily a bad thing.

Over time, you could establish an entire, like the NYSE, system where people bid to invest in your education based on:

  • Your grades (past-performance)
  • Your chosen career path
  • Market conditions
  • Work Experience
  • Any other factors

What do you think?

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