Student loans to be made Shariah complaint; repayment limited to loan amount

President Dr. Mohamed Muizzu, on Thursday, has directed the relevant authorities to ensure that all higher education and training loans—both domestic and international—comply with Shariah principles. 

The President announced his decision via a post on X.

In this regard, the President has ordered to remove existing one percent administrative fee on loans issued by the Ministry of Higher Education, Labour, and Skills Development, ensuring that no additional charges are imposed beyond the principal amount. He has also ordered to adjust the loan amounts for previous borrowers by deducting the administrative fee from their outstanding balances.

The decision comes amid mounting concerns from local students studying abroad over difficulties in acquiring funding under student loans.

In this regard, pilot students studying in Barcelona had recently sent a letter to the Higher Education Ministry highlighting difficulties they face including in obtaining visas and the lack of adequate stipend for expenses incurred for this as a result of which they are forced to spend from their pockets. They also conveyed difficulties faced by additional time required for the course, which exceeds the loan period.

The Ministry responded almost month a later, stating that if students require additional funds due to circumstances beyond their control, and these expenses cannot be covered by the initial loan program, they will be granted a "top-up" loan. The response detailed the eligibility criteria for top-up loans while instructing students to apply accordingly once applications open.

The former administration also made reforms to student loans in order to address difficulties faced by students in their repayment including slashing the administrative fee on loans issued by Higher Education Ministry from five percent to one percent.

The administration also extended the loan repayment period to 20 years and made adjustments to loan amounts of students who have repaid the loan at higher rates.