Short answer
Student loans that charge interest are haram in the mainstream Hanafi view, because they are loans with interest. Interest-free loans, grants and scholarships are halal. A mufti may allow an interest loan in a real case of need where every other route has failed, so ask about your own situation.
An interest-bearing student loan is a loan with riba and is not permitted. Most Deobandi muftis do not count ordinary higher education as a necessity that permits riba, though a mufti may allow it in a particular case of genuine need.
The four schools agree on this.
Explanation
In the US, federal student loans charge interest. On subsidized loans the government covers the interest while you study, but interest runs after that, so the contract still contains riba. Private student loans charge interest from the start. A loan with no interest and no time-based charges is halal.
In the UK, student finance loans also add interest. Some scholars argue that because repayment depends on income and the balance is written off after a period, the scheme works more like a graduate tax. Other scholars reply that it is still a loan with interest added, and this is the more widely held position among Hanafi muftis. Some have allowed it where a student has no other way to study.
Halal routes to look into first:
- Grants, scholarships and bursaries, including need-based federal grants.
- Employer tuition support or apprenticeships.
- Cheaper paths, such as community college before transferring.
- Working while studying, and saving before you start.
- Interest-free loans from family or from Islamic student funds.
If you already have student loans, you must still repay them, since the amount you borrowed is a real debt. Pay extra when you can to reduce the interest, repent, and do not take new interest loans. Allah promises a way out to those who fear Him (65:2 to 3).
Ask a mufti about your own case. This answer explains the general ruling. When the details of your situation matter, as they do here, ask a qualified mufti and give them the full facts. Where to ask a scholar.
The evidence
Quran, Surah Al-Baqara 2:275
ٱلَّذِينَ يَأْكُلُونَ ٱلرِّبَوٰا۟ لَا يَقُومُونَ إِلَّا كَمَا يَقُومُ ٱلَّذِى يَتَخَبَّطُهُ ٱلشَّيْطَٰنُ مِنَ ٱلْمَسِّ ۚ ذَٰلِكَ بِأَنَّهُمْ قَالُوٓا۟ إِنَّمَا ٱلْبَيْعُ مِثْلُ ٱلرِّبَوٰا۟ ۗ وَأَحَلَّ ٱللَّهُ ٱلْبَيْعَ وَحَرَّمَ ٱلرِّبَوٰا۟ ۚ فَمَن جَآءَهُۥ مَوْعِظَةٌۭ مِّن رَّبِّهِۦ فَٱنتَهَىٰ فَلَهُۥ مَا سَلَفَ وَأَمْرُهُۥٓ إِلَى ٱللَّهِ ۖ وَمَنْ عَادَ فَأُو۟لَٰٓئِكَ أَصْحَٰبُ ٱلنَّارِ ۖ هُمْ فِيهَا خَٰلِدُونَ ﴿٢٧٥﴾
Those who consume interest cannot stand [on the Day of Resurrection] except as one stands who is being beaten by Satan into insanity. That is because they say, "Trade is [just] like interest." But Allah has permitted trade and has forbidden interest. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allah. But whoever returns to [dealing in interest or usury] - those are the companions of the Fire; they will abide eternally therein.
A loan with interest falls under the ban on riba.
Quran, Surah At-Talaaq 65:2-3
فَإِذَا بَلَغْنَ أَجَلَهُنَّ فَأَمْسِكُوهُنَّ بِمَعْرُوفٍ أَوْ فَارِقُوهُنَّ بِمَعْرُوفٍۢ وَأَشْهِدُوا۟ ذَوَىْ عَدْلٍۢ مِّنكُمْ وَأَقِيمُوا۟ ٱلشَّهَٰدَةَ لِلَّهِ ۚ ذَٰلِكُمْ يُوعَظُ بِهِۦ مَن كَانَ يُؤْمِنُ بِٱللَّهِ وَٱلْيَوْمِ ٱلْءَاخِرِ ۚ وَمَن يَتَّقِ ٱللَّهَ يَجْعَل لَّهُۥ مَخْرَجًۭا ﴿٢﴾ وَيَرْزُقْهُ مِنْ حَيْثُ لَا يَحْتَسِبُ ۚ وَمَن يَتَوَكَّلْ عَلَى ٱللَّهِ فَهُوَ حَسْبُهُۥٓ ۚ إِنَّ ٱللَّهَ بَٰلِغُ أَمْرِهِۦ ۚ قَدْ جَعَلَ ٱللَّهُ لِكُلِّ شَىْءٍۢ قَدْرًۭا ﴿٣﴾
And when they have [nearly] fulfilled their term, either retain them according to acceptable terms or part with them according to acceptable terms. And bring to witness two just men from among you and establish the testimony for [the acceptance of] Allah. That is instructed to whoever should believe in Allah and the Last day. And whoever fears Allah - He will make for him a way out And will provide for him from where he does not expect. And whoever relies upon Allah - then He is sufficient for him. Indeed, Allah will accomplish His purpose. Allah has already set for everything a [decreed] extent.
Avoiding haram for Allah's sake is met with His provision.
Sahih Muslim 1598
Sahih... آكل الربا وموكله وكاتبه وشاهديه ...
"He cursed the one who consumes riba, the one who pays it, the one who writes it and its two witnesses."
The borrower who pays interest is included.
Where the ruling is recorded
- al-Ashbah wa al-Nazair (Ibn Nujaym), The fifth principle: harm is removed. The allowance for a person in need to borrow on interest, which muftis apply narrowly.
- Radd al-Muhtar (Ibn Abidin), Kitab al-Buyu', Bab al-Riba. Any stipulated increase on a loan is riba.
This answer is pending review by the scholars on our team. Quran translation by Sahih International. Hadith Arabic from the standard editions of the six books and the Muwatta, with gradings as recorded there; the English is our own rendering. Spotted a mistake? Tell us.