The new scheme, which sees higher yearly fees and higher interest loans to pay for them, conflicts with the rule in Islamic law that says money should not be made from money, thereby banning charging or paying interest.
Currently, students who take out a loan in order to pay for their university fees have to repay that loan once they earn above a certain wage threshold. They are charged interest on the loan at the market rate of inflation. The rate of inflation will increase from 2012, when the Government’s plans come into force, to up to 3%, if they earn above £21,000 per year.
Muslim student groups say this leap in the interest rate is clearly usury and therefore they cannot take advantage of the loan if they need assistance with paying their university fees.
The Federation of Student Islamic Societies (FOSIS) said the matter was a 'pressing issue' and that the organisation is working closely with the National Union of Students (NUS). However, a solution may not be available for another two years, during which many Muslim students will have to deter their further studies, or borrow from family and friends.
On possible solution being explored is the creation of a loan system similar to that of Islamic mortgages. In an Islamic mortgage the bank buys the property and the borrower pays the bank a rent to live in the property. Some mortgages have the option to buy the property at the end of the contract. A scheme for higher education loans could operate on the basis that education is 'rented' out to the student, with the student paying a 'rent' to the lender.
However, this or another solution is only likely to be available by 2013 or 2014.