A Student Finance England loan charges interest, so on the plain reading of the contract it is a riba-bearing loan and the majority of UK scholars treat taking one as impermissible except under genuine necessity. Plan 5, the plan for every English undergraduate who started on or after 1 August 2023, is charged at a rate normally equal to the Retail Price Index, which gov.uk showed as 4.1% on 29 September 2026. The government's interest-free alternative, a takaful-based scheme written into the Higher Education and Research Act 2017, is designed and certified but had no launch date on its official page when we checked. This article gives the ruling, the numbers, and the routes families use while they wait. Start with our is it halal verdict hub if you want the wider framework.
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What a Plan 5 loan actually charges in 2026
Plan 5 covers tuition fee loans and maintenance loans for English students who began an undergraduate course, a PGCE or an Advanced Learner Loan on or after 1 August 2023, and it will also cover finance drawn under the Lifelong Learning Entitlement. The Student Loans Company's Plan 5 interest page states that interest runs from the day the first payment is made to you or your university, is added to the balance monthly, and is normally set each 1 September at the previous March's Retail Price Index. The Department for Education can apply a temporary cap if comparable market rates fall below RPI, but the page states the cap is not currently being applied.
The published history shows how much that index moves. The SLC table lists 7.1% in August 2023, a climb to 8% by August 2024, 4.3% for September 2024 to August 2025 and 3.2% for September 2025 to August 2026. The gov.uk repayment guide listed the current Plan 5 charge as 4.1% on the day we checked. Repayments are 9% of income above £25,000 a year (£2,083 a month), and any balance left is written off 40 years after the April you were first due to repay. A graduate earning £30,000 therefore repays £450 a year, or £37.50 a month, regardless of how large the balance is or how fast interest is accruing on it.
| Plan | Who | Interest basis | Repay above | Written off |
|---|---|---|---|---|
| Plan 5 | England, started from Aug 2023 | RPI, cap not currently applied | £25,000 | 40 years |
| Plan 2 | England 2012 to 2023, Wales from 2012 | RPI plus up to 3%, capped at 6% now | £29,385 | 30 years |
| Plan 4 | Scotland (SAAS) | RPI or base rate plus 1%, whichever lower | £33,795 | 30 years |
| Plan 1 | Northern Ireland, England pre 2012 | RPI or base rate plus 1%, whichever lower | £26,900 | 25 years |
| Postgraduate | England and Wales masters, doctoral | 6% currently | £21,000 | 30 years |
Is interest indexed to inflation still riba? The two positions
The classical definition of riba al-nasi'ah is any contractual excess over the principal in a loan, and the Plan 5 contract contains exactly that: the borrower owes more pounds than were advanced, and the increase is written into the agreement from day one. The majority of UK scholars and fatwa bodies hold that this settles the matter. Inflation indexation does not change the contract's nature, because the lender is still stipulating a return on a loan, and the figure can exceed inflation (the Plan 2 margin of up to 3% above RPI makes that explicit). On this view, the loan is impermissible unless the student can show necessity (darurah) or pressing need (hajah), and even then the obligation is to minimise the haram element and exit it as soon as possible.
A minority position, argued by some contemporary scholars, holds that an increase that merely preserves the real value of the money lent is not riba, because the lender is receiving back the same purchasing power rather than a profit. Supporters of this view accept RPI-only indexation but not RPI plus a margin, which means they could accept Plan 5 as currently written while rejecting Plan 2 on higher incomes. Critics reply that no single index measures a borrower's purchasing power, that the state can and does change the formula, and that the August 2024 rate of 8% was far above what most people experienced as inflation that year. HalalWallet does not issue fatwas. Our editorial view is that a reader who follows the majority position should treat the loan as haram and look at the routes below, while a reader who follows the minority position should at least restrict borrowing to Plan 5 tuition fees and avoid any plan with a margin.
Alternative Student Finance: what the official page says today
The Department for Education's Alternative Student Finance guidance, last updated on 9 June 2025, describes a product that mirrors the conventional loan in every amount and timing while replacing the loan contract with takaful, a pooled mutual fund. Students would apply through Student Finance England for an alternative payment covering tuition and living costs. After graduating they would make contributions to the takaful fund, calculated on income in the same way as Plan 5 repayments, and those contributions would be ring-fenced to fund future students. The page states that applicants will suffer no detriment and gain no advantage compared with conventional borrowers.
The legal foundation is already in force. Section 86 of the Higher Education and Research Act 2017, titled Power to make alternative payments, inserts a subsection (4A) stating that regulations may not provide for alternative payments to bear any interest. The Islamic Finance Council UK has been appointed as secretariat and has set up an independent Islamic Finance Supervisory Board to certify the product. What is missing is the secondary legislation that sets the amounts and the contribution formula, and a launch date. The page says the scheme must mirror the Lifelong Learning Entitlement, which starts in the 2026 to 2027 academic year, and that alternative student finance will follow as soon as possible after that. On 29 September 2026 no start date had been published. Anyone planning for a 2027 entry should check the page again rather than assume it will be ready.
Who can get what: the 2026 to 2027 loan amounts
Knowing the amounts matters because the most common compromise in Muslim families is to take the tuition fee loan and refuse the maintenance loan. For courses in the 2026 to 2027 academic year, gov.uk lists the full-time Tuition Fee Loan at up to £9,790, paid directly to the university. The Maintenance Loan is means-tested on household income and paid to the student each term: up to £9,118 living with parents, £10,830 living away from home outside London, and £14,135 living away in London. Both loans sit on the same Plan 5 terms, so a tuition-only borrower still has a riba-bearing contract, just a smaller one.
| Route | What is borrowed | Shariah status (majority view) | Practical cost |
|---|---|---|---|
| Full loan | Tuition plus maintenance, Plan 5 | Impermissible without necessity | 9% of income over £25,000 for up to 40 years |
| Tuition-only loan | Up to £9,790 a year, Plan 5 | Still riba, but a smaller haram element | Same 9% formula on a smaller balance |
| No loan | Nothing; fees paid by family, work, bursaries | Permissible | Up to £9,790 a year in fees plus living costs found elsewhere |
| Alternative Student Finance | Takaful contribution, not a loan | Designed to be compliant, certified by an independent board | Mirrors Plan 5 amounts; not yet available |
How families actually fund a degree without the loan
The honest picture is that most British Muslim students do take at least the tuition fee loan, and a minority finance the whole degree another way. The routes that work are unglamorous. Living at home removes the largest cost. Part-time and vacation work covers living expenses for students outside London more often than people expect. University hardship funds, bursaries and scholarships are listed on each institution's own pages and on the gov.uk extra help page, and they do not have to be repaid. Degree apprenticeships, which gov.uk highlights as an alternative, pay a salary and charge no tuition. Family contributions, including gifts from grandparents and interest-free loans (qard hasan) from relatives, remain the backbone.
- Apply for every bursary and scholarship your university lists, before the deadline, since none of them carry interest.
- Price the degree at home versus away: the 2026 to 2027 maintenance figures put the difference at over £5,000 a year between living with parents and living in London.
- Ask the family for qard hasan with a written repayment schedule, so the loan is clear and the lender is protected.
- Check whether your course is offered as a degree apprenticeship, which removes tuition fees altogether.
- Open a halal current account for the money you do have, so your savings are not generating interest while you study; our student banking guide covers the options.
- If you still need to borrow, limit it to the tuition fee loan and plan to clear it early once you earn.
Zakat is a legitimate source for students in hardship, but the rules are narrower than many assume. NZF, the National Zakat Foundation, states that its Hardship Relief Fund pays one-off cash grants of between £280 and £1,870 depending on family size and legal status, for food, clothing and basic living costs, with one successful application per person per year. Its Housing Fund, which covers rent and council tax arrears, explicitly excludes full-time students. Its skills and qualifications programme funds training, which may suit vocational routes. None of this pays tuition fees, and NZF requires applicants to be entitled to receive zakat in the first place.
Scotland, Wales and Northern Ireland are different contracts
The ruling does not change across the border, but the contract does. Scottish students funded through the Student Awards Agency Scotland are on Plan 4, where gov.uk states the interest charged is the lower of RPI or the Bank of England base rate plus 1%, with repayments above £33,795 and a 30-year write-off for loans first paid from August 2007. Welsh students who started from September 2012 are on Plan 2, on the same RPI-plus-margin terms as English 2012 to 2023 borrowers, and gov.uk notes that full-time Welsh students may have £1,500 of their Maintenance Loan written off. Northern Irish students are on Plan 1, charged at the lower of RPI or base rate plus 1%, repaying above £26,900 with a 25-year write-off. Alternative Student Finance is an England-only policy; the official page applies to England and says nothing about the devolved nations.
Already a graduate with a loan? What to do now
If you took the loan as a teenager and now regret it, the position of most scholars is that you repent, repay what you are contractually bound to repay, and do not add to it. Purification does not apply to you: purification is the duty of someone who has received riba, for example interest on savings, and must give it away. A borrower pays riba rather than receives it, so there is nothing to purify, only an obligation to exit. Whether to overpay is a financial question with a Shariah edge. Overpaying reduces the interest you will pay, which most scholars would encourage if the money is spare, but on Plan 2 and Plan 5 many borrowers will never repay in full before the write-off, so overpayments can be money given to the Treasury for nothing. Run the numbers on your own balance before deciding.
Graduates who want to stop interest accruing on the balance can repay in full from savings or a family loan, which is the only way to end the contract early. Those who cannot should at least ensure their savings are not themselves generating interest, which compounds the problem. The halal savings under £10,000 guide shows where small balances can sit. For everyday banking, the fintech accounts from Algbra and Kestrl give a debit card without a credit facility, and the bank accounts hub lists every compliant account.
Our view
A sixth-former with a family that can pay fees, or a course available as a degree apprenticeship, should not take the loan. A student whose only route to university is the tuition fee loan is in the territory of need that most scholars recognise, and should borrow the minimum, decline the maintenance loan where living at home or working makes that possible, and plan to repay early. A parent should start saving now, because a child born this year will reach university age with or without Alternative Student Finance, and a halal Junior ISA removes the problem entirely. Our Junior ISA guide explains how. Facts checked against gov.uk, legislation.gov.uk, nzf.org.uk on 29 September 2026.
Frequently asked questions
Is the tuition fee loan haram if I refuse the maintenance loan?
On the majority view, yes, because the tuition fee loan is on the same Plan 5 terms and accrues the same RPI-linked interest. Refusing the maintenance loan reduces the size of the haram element and is a sensible step for someone who has no other way to pay fees, but it does not convert the remaining contract into a permissible one. The compliant routes are family funding, bursaries, work, or Alternative Student Finance once it launches.
When will Alternative Student Finance be available?
No date has been published. The Department for Education page, last updated 9 June 2025, says the scheme must mirror the Lifelong Learning Entitlement that starts in the 2026 to 2027 academic year, and that alternative student finance will follow as soon as possible after that. Secondary legislation setting the amounts and contribution formula has not yet been made. Check the gov.uk page before each application cycle rather than relying on older news reports.
Is the Plan 5 interest rate really just inflation?
Normally, yes. The SLC states the Plan 5 rate is set each September at the previous March's RPI and that no cap is currently applied. The published history shows 7.1% in August 2023, 8% in August 2024, 4.3% for 2024 to 2025 and 3.2% for 2025 to 2026, with 4.1% showing on gov.uk in October 2026. Whether an inflation-linked increase counts as riba is the scholarly dispute at the heart of this question.
Can I get zakat to pay for university?
Not for tuition fees through NZF. Its Hardship Relief Fund pays grants of £280 to £1,870 for basic living costs to eligible Muslims who qualify as zakat recipients, once per year, and its Housing Fund excludes full-time students. Some mosques and community funds help students directly, and universities run their own hardship funds that do not depend on zakat eligibility, so ask both.
Do I need to purify anything if I already have a student loan?
No. Purification applies to riba received, such as interest paid on a savings account, which must be given away. A borrower pays interest rather than receiving it, so there is nothing to purify. The obligation most scholars describe is repentance, repaying what you are contractually bound to repay, not borrowing further, and clearing the balance early if you can do so without hardship.
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Are Scottish or Welsh student loans any better from a Shariah point of view?
They are still interest-bearing, so the ruling is the same. Scottish Plan 4 and Northern Irish Plan 1 loans charge the lower of RPI or base rate plus 1%, and Welsh students are on Plan 2 at RPI plus up to 3%, capped at 6% at present. The lower formulas reduce the cost but do not remove the contractual excess over principal that the majority of scholars identify as riba.
