Q: Do students have to pay zakāh on money from a student loan, if they have it in their possession?
For e.g. a person took out tuition fee loan and maintenance loan (not grant) which roughly comes to about £6000. From that, £3000 is automatically taken by the university i.e. tuition fee which leaves a person with £3000 to spend. He then spends £2000 and is left with a remainder of a £1000.
A person who possesses this £1000 (at the time when their zakāh is due) would he or she need to pay zakāh on this money which is left surplus from their maintenance loan?
الجواب حامدًا و مصليًا و منه الصدق و الصواب
A: Zakāh is always payable by the creditor and not the debtor. As the remaining £1000 of the student loan[1] is a debt[2] it is not liable to zakāh.
The advice I have received from the Legal & Compliance Manager and senior solicitor of the Student Loan Company is that the student assumes liability of the loan right at the onset even if repayment of the loan is subject to certain criteria.
Even though the proceeds of the student loan cannot therefore be added to one’s Zakātable assets, for those repaying the same, twelve months worth of repayments can be deducted from their qualifying Zakātable assets.
Please see this Q and A for more details.
[1] For ruling on UK student loans see, please see the Student Loans research paper on the Al Qalam website.
[2] For a detailed breakdown, please see The Categorisation of Debt for Zakah Purposes research paper on the Al Qalam website.
And Allah knows best.
Mufti Mohammed Zubair Butt
Chair, Al-Qalam Shariah Scholars Panel
Mohammed Zubair Butt