Learners in limbo as government fails to set date for halal student loans
A pre-tender notice earlier this year pointed to a 2027 rollout but time is running out as October deadline looms
Andy Burnham’s new government still has no firm date for the rollout of Islamic student finance, leaving learners in limbo as university deadlines loom — despite hopes earlier this year that it would go live in 2027.
The Department for Education (DfE) published a pre-tender market engagement notice in April, with a contractual timeline that indicated it hoped to have the long-awaited alternative student finance (ASF) system up and running in August 2027. Hyphen understands that, under Keir Starmer’s government, the department’s ambition had been a rollout in time for the 2027/28 academic year.
But the DfE told us it had not “committed to a target implementation date” and would not give any further information. It maintains only that ASF will be rolled out “as quickly as possible” after the introduction of the lifelong learning entitlement (LLE) — a wider revamp of post-18 student funding — in January. The uncertainty risks excluding another cohort of Muslim students from higher studies, as degrees at Oxford and Cambridge, and most courses in medicine, veterinary medicine and dentistry, have a 15 October application deadline, while most other courses have a 13 January 2027 cutoff.
Meanwhile, a petition calling on the government to “set a firm launch date” for the sharia-complaint ASF has been signed by more than 1,400 people in just over a month.
Haziq Hussain, owner of XR Consultancy, an apprenticeship and careers support service, set the petition up. “A lot of people reached out to me directly, who said they put their university plans on hold, actually decided not to pursue higher education, because the only way they could get into university was to get a student loan and they didn’t want that burden of the interest,” he said.
“It’s unfair for them to delay their education because the government said they were going to do something but then haven’t really updated. I think it’s really disappointing.”
Rahma Hegy, vice president of student affairs at the Federation of Student Islamic Societies, told Hyphen: “We understand DfE caution in wanting to be certain they can meet a date before announcing one, but we’ve said consistently, and will continue to: it’s essential that ASF is delivered in a timely manner.
“We’d welcome a public commitment as soon as the DfE can make one. A great deal is dependent on this for students, their education and progression, and there are real lives shaped by how this rollout unfolds. Students need clarity on the timeframe so they can plan their futures with confidence.”
The ASF system is intended to remove barriers to student finance for aspiring Muslim undergraduates who feel conflicted or unable to take out conventional, interest-bearing student loans to cover the cost of their tuition fees and living expenses, due to their faith.
It will be based on the Islamic finance concept of takaful, a form of group-based mutual support, and recipients will repay “contributions” equivalent to the traditional student loans repayments, which will be “ringfenced” to help future students, DfE guidance states.
But Muslims students who sign up to ASF are set to have an alternative charge, equivalent to the value of interest, applied to their total contribution back to the scheme, Hyphen understands.
This levy is set to be calculated using a benchmarking approach and will be equivalent to the interest charged on conventional student loans, in a bid to ensure parity between the two.
This has been described as a missed opportunity to create a better system, rid of the impact of future interest rate hikes, for all — as ASF will be open to non-Muslims too.
“This was an opportunity for them to create a level playing field, write off the interest from the loans and just get them to pay back the principal which would make more sense,” said Islamic finance expert Shaista Mukadam, a senior lecturer at Birmingham City University.
The government has said that ASF will “mirror” the LLE, which will follow the Plan 5 system of student loan repayments. Under this model, repayments start once a borrower earns more than £25,000 a year before tax, which is £2,083 a month — with students paying back 9% of everything they earn above this threshold.
Plan 5 loans are written off after 40 years and the interest rate charged on them is typically based on the Retail Price Index, a measure of inflation, from the previous March, currently 3.2%.
The more controversial Plan 2 loans were issued to students who started courses in England between September 2012 and July 2023, charging RPI plus compound interest of up to 3%.
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But students who borrowed on these terms only start repayments once their salary hits £29,385 a year, with outstanding debt written off after 30 years.
Savings supremo Martin Lewis has noted that “while Plan 5 interest rates are lower, set at inflation (what economists refer to as ‘no real interest’), the lower repayment threshold (not much more than full time minimum wage) and much longer repayment terms outweigh that and really drive the cost back up.
“More on Plan 5 will clear the loan in full (as it lasts longer) but they are projected to pay back far more in total than those on Plan 2.”
Then prime minister David Cameron declared 13 years ago that “never again should a Muslim in Britain feel unable to go to university because they cannot get a student loan – simply because of their religion”. But the development of ASF has since been beset with delays.
Liberal Democrat education spokesperson Munira Wilson told Hyphen: “No one should have to face a conflict between faith and education.”
She said her party “will continue to push the government to introduce a finance mechanism that will allow Muslim students to access student loans without compromising their faith”.
