Alternative Student Finance (Sharia-Compliant
Loans) — Where Things Currently Stand
Back in December 2016, in a post about a school careers fair, we touched on a question a student had raised: is a UK student loan compatible with Islamic law? Nearly a decade on, it's worth a proper update, because both the underlying problem and the government's proposed fix have moved on since then.
The history — and it's more specific than “interest changed at some point”
Under Islamic law (and we are
not experts) our understanding is money creating more money through interest
(riba) is problematic, which is why student loan interest has long concerned
some Muslim students and families. As we noted back in 2016: before 2012,
student loan interest was set at RPI only, and the Muslim Council of Britain guided in a very
short statement (much quoted at Open Days) that seemed to imply because the
loan only grew in line with the cost of living, this wasn't necessarily
problematic. That changed in 2012, when new loans (Plan 2) introduced
interest of RPI plus up to 3% while studying, a meaningfully different
proposition, and the point at which that earlier guidance stopped clearly
applying.
Students starting from 2023
onwards (Plan 5 loans) accrue interest at RPI only again with no extra
percentage on top. That's arguably closer to the original pre-2012 structure
the Muslim Council of
Britain assessed
as not necessarily problematic and yet we haven't found any updated public
guidance from them, or similar bodies, revisiting the question considering that
change. This looks like a gap between a live policy change and public religious
guidance.
What the government is doing instead of revisiting old guidance
Since 2014, government has been
consulting on and developing a purpose-built alternative: Alternative Student Finance (ASF), based on the Islamic
finance principle of Takaful which is a group-based mutual support
rather than a commercial loan. Students would receive funding for tuition and
living costs from a ring-fenced Takaful fund; after graduating, they'd make
contributions back into that fund, calculated to match what they'd have repaid
on a conventional loan, so there is in the government's own words “no detriment nor advantage” either way. It
would be independently certified as Sharia-compliant by the Islamic Finance
Supervisory Board.
The 2016 white paper that
followed the original consultation said this product would be “available to everyone” not restricted to
Muslim students, leading to the bigger question below.
When does it actually arrive?
Still no firm date. ASF must structurally
“mirror” the incoming Lifelong Learning Entitlement (see our previous update),
and government has said ASF cannot launch before LLE is in place. That means it
inherits every LLE delay, plus whatever delays are specific to ASF itself. A
decade-plus of consultation and “in development” is worth bearing in mind
before treating any date as settled.
The bigger question
Strip away the religious
framing, and ASF's
mechanics, income-contingent contributions, collected through the tax system,
into a collective fund, with no individual debt attached, looks a great deal
like a graduate tax. Sector analysts, particularly Wonkhe, have made exactly this point, and it
raises a fair question: if a tax-collected, contribution-based model is judged
workable for one group of students, why run two structurally different systems
designed deliberately to produce identical financial outcomes? It's a genuine,
unresolved debate rather than a settled one, arguments for keeping them
separate tend to be about political sensitivity and limiting the mutual-fund
structure to where it's actually required for religious compliance; arguments
the other way point to duplicated administration and a decade of delay for an
option that needed the most care.
Trusted sources on this
•
GOV.UK
— Alternative student finance — the official position and how it's meant to
work
•
House
of Commons Library — Sharia-compliant alternative student finance : independent
background and the full delay timeline since 2013
•
Wonkhe
— “A graduate tax is coming after all. For Muslim students” : the analysis
behind the question above
•
Islamic Finance Council UK
: secretariat for the certification process
This page first grew out of a
conversation at a school careers fair in December 2016: see our original post: Supporting
Moor End Academy Careers Fair.
We'll
update this page again as a firmer timeline for ASF emerges. Last updated: [August/2026].
The Lifelong Learning Entitlement — Where
Things Currently Stand
Turn
and face the strange... Welcome back to Ch-ch-changes, where we track the
bigger shifts in UK student finance and support as they happen, because policy
doesn't wait for a tidy announcement, and neither should you.
We're kicking this off again
with the Lifelong Learning Entitlement (LLE), arguably the biggest
structural change to English student finance in over a decade, and one that
only 12% of the adult population currently knows is coming. If you're a
student, a parent, or an adviser, it's worth understanding now rather than in
January 2027 when it actually bites.
What is it?
The LLE replaces the current
undergraduate student finance system and Advanced Learner Loans (levels 4–6) in
England with a single, credit-based entitlement. Every new learner gets funding
equivalent to four years of post-18 education, currently £38,140, based
on 2025/26 fee rates and usable up to age 60. Instead of one continuous
three-year course, you can draw on it flexibly: a full degree, or shorter
modules spread across a working life. It also scraps the old rule blocking
funding for a second qualification at the same level, which matters if you're
retraining.
When does it actually start?
This is the part that trips
people up. “2026/27” doesn't mean business as usual from this September:
•
Applications open from September 2026
•
But only for courses and modules starting from January
2027 onwards
•
Anything starting before 1 January 2027 stays on the
current system, start to finish
What's covered at launch
Not everything, yet. At launch
it covers full courses at levels 4–6 (degrees, Higher Technical Qualifications,
some distance learning), plus modules of high-value technical courses, and
level 6 modules tied to government-identified priority skills areas. It isn't
yet a “spend it on any module you like” system.
Worth watching
A few things flagged by sector
commentators in particular Wonkhe, who've tracked this closely since it was
first announced:
•
The list of approved providers won't be confirmed until
summer 2026, after applications open, making early research difficult
•
The rollout has already slipped more than once since
its original 2025 target
•
The initial offer leans on providers taking on
financial risk against genuinely uncertain student demand and research suggests
real appetite for this kind of flexible learning is mixed
•
Postgraduate study isn't included
•
Credit transfer between institutions is still
unresolved, with a consultation not expected until early 2026
Trusted sources to follow this
•
GOV.UK : LLE guidance for providers ~ the official line, updated as details firm
up
•
The
Education Hub: What the LLE means for you ~ DfE's plain-English version
•
House
of Commons Library briefing ~ independent, thorough, tracks the delays
•
Wonkhe ~ exceptional sector
analysis and the most reliably critical eye on this
•
Office
for Students: modular provision and the LLE ~ regulatory detail
We'll
keep this page updated as the picture becomes clearer. Last updated:
[August/2026/].
Changes Archive article below
English University undergraduate tuition fees to rise for all students from academic year 2017/18
Read amendment regulations here
Read related press articles - Independent
BBC News
October 2016
Department for Education confirms that EU students starting a higher education course in September 2017 will still have access to funding.
Read the press release - here
September 2016
Welsh Government announce yesterday (27/09/2016) the outcome of Professor Diamond's review of student funding for Higher Education students who are domiciled in Wales.
Read the full report here - The Diamond Review
July 2016
Jo Johnson MP Minister of State for Universities and Science today announced changes to the Tuition Fee cap and loan amounts for English and Wales domiciled Higher Education students as the Higher Education and Research Bill progresses pending the introduction Teaching Excellence Framework.
Read all the details HERE
June 2016
Postgraduate Student Loans
The Education (Postgraduate Master's Degree Loans) Regulations 2016 come into force on 16th June.
Apply here from late June
See also
Factsheet on Postgraduate Loans
May 2016 Edition of Exchange
Quick Guides on Postgraduate Loans
Long Residence
Amendement to the Education (Student Fees. Awards and Support) Regulations 2016 come into force on 6th June.
The amendements create a new category of eligible student in the Education (Student Support) Regulations 2011
(3) In Schedule 1, Part 2 (Eligible Students – Categories)
“Long Residence 13.—(1) A person who on the first day of the first academic year of the course—
(a) is either—
(i) under the age of 18 and has lived in the United Kingdom throughout the seven-year period preceding the first day of the first academic year of the course; or
(ii) aged 18 years old or above and, preceding the first day of the first academic year of the course, has lived in the United Kingdom throughout either— (aa) half their life; or (bb) a period of twenty-years;
(b) is ordinarily resident in England;
(c) has been ordinarily resident in the United Kingdom and Islands throughout the three-year period preceding the first day of the first academic year of the course; and
(d) subject to sub-paragraph (2), whose residence in the United Kingdom and Islands has not during any part of the period referred to in paragraph (c) been wholly or mainly for the purpose of receiving full-time education.
(2) Paragraph (d) of sub-paragraph (1) does not apply to a person who is treated as being ordinarily resident in the United Kingdom and Islands in accordance with paragraph 1(4).”
This change is particularly important to young people who have lived in the UK for a long periods but are still subject to immigration control. Many young people have passed through UK schooling and yet reach the stage when they should be entering higher education but have been prevented from doing so by the robust residency criteria requirements. This change to the regulations in Engalnd and Wales will open access to higher education for some of these students.
May 2016
White paper - Changes Afoot
Changes in Higher Education are all part and parcel of the sector but for the uninitiated it can all seem very bewildering and as if the players are all speaking in a secret code. Today Jo Johnson MP Minister of State for Universities and Science delivered the White Paper - Success as a knowledge economy: teaching excellence, social mobility and student choice . A higher education bill will follow later this week.
Many prospective students and their families may find it tough to understand the various media perspectives and worry what to focus on. To help the fabulous wonkhe shared their expert insight in concisely reporting the days events and response with more considered analysis to follow.
When you work in HE it is common to play "bingo" with all the terminology, acronyms, theories and theses. Levitate Student rather liked the comment by Emran Mian of the think tank Social Market Foundation
“Higher education is too much like a club where the rules are made for the benefit of universities. These reforms will begin to change that. Students will have access to more information when they’re making application choices; and universities will be under more pressure to improve the quality of teaching"
Certainly it can seem like a club where many staff and students don't even feel like fully signed up members even if they are paid up. Changes can often result in new students being unclear what they are signing up for.
Levitate Student is interested in money and consumer matters first and foremost. What we know from the changes on that front is that the current £9,000 fee cap will be subject to change from 2017. The level to which the fee charge can rise will be linked to teaching quality. This will serve to counter the stance taken by the unis when they were allowed to offer a "variable fee" and the majority opted to charge the maximum irrespective of their reputation, quality or league table slot. Universities will now face more regulation, requiring them to be more open and transparent about data sharing particularly regarding quality and students outcomes and destinations. They will also need to be comfortable with any new providers entering the market competing for their customers. Fees rising will displease many who fight for education for all as a right and would wish to see no tuition fees.
Fee levels will be allowed in some case to rise with inflation, linked to the Retail Price Index (rather than the Consumer Price Index) which is better for the universities purses than the student's.
In 2016/17 the Maintenance Grants (see Maintenance Grants RIP) are to be removed from the funding package in England and so the total burden of student loan is set to increase even more for future students. A niggle of doubt is a system of loans (not grants) would be easier to off load by Government in the future to private lenders. Come what may the sector is moving further and further away from non-repayable grants to support those from lower income backgrounds. Lets see how the devolved governments adjust their funding provision in time, will they follow England lead or take their own stance?
We share the hope expressed by Les Ebdon the Director of Office for Fair Access
“I welcome the increased emphasis on fair access to higher education in this important White Paper. Making sure that talented people from disadvantaged backgrounds are able to access – and succeed – in higher education is key to increased social mobility"
We like the potential for more mobility within programmes of study to include the potential to transfer more easily between institutions. This will help students with changes of circumstances and hopefully those students whose confidence builds from the point of admission. More customer choice is always welcomed though not if the resulting award is regarded as sub-standard so it will be interesting to see how this option develops. Also the new HE providers will have no track record of success and freedom to move from a poor provider is limited by the number of years of funding entitlement. Needing to repeat elsewhere because a course wasn't up to standard will only mean a wasted year of funding.
The photographed government document leaks referring to "marginalised students" does cause a doubt as to whether the hope is that these "challenger" providers are considered an option for the "marginalised". Don't worry if you are not deemed suitable for Oxbridge....you can always study at Facebook Central......
We would rather the so called "marginalised", were less so and supported through fair access to the institution of choice based on ability.
Alex Neill, Director of Policy and Campaigns at Which? said
“We welcome measures to give students more insight into student experience, teaching standards and value for money. These proposals could not only drive up standards, but could also empower students ahead of one of the biggest financial decisions of their lives."
We share this view and welcome the shift that alternate private providers must register with The Office of the Independent Adjudicator . We would like responsiveness to complaint handling improve and time scales for resolution reduced considerably.
Which reported that many universities fail to meet requirements set by the Competitions and Markets Authority with respect to how students are treated as customers. Universities do have a long way to go yet in delivering holistic, institution wide customer service excellence.
Our biggest niggle of all is not having the certainty anymore that the system a student signs up for won't be subject to significant change after they are locked in.
EU students - changes to residency rules
On March 1st 2016 Joe Johnson MP (Minister of State for Universities and Science) announced a significant planned change to the Education (Student Support) Regulations 2011 which will change the residency requirements for EU national students.
Currently an EU national is entitled to apply for
- Tuition Fee Loan only if they come to UK to study in Higher Education
- Tuition Fee Loan and Living Cost Support (currently loans and grants) if they have lived in UK for 3 years prior to the start of their course.
- Tuition Fee and Living Cost Support if they are a EEA Migrant Worker or Family Member of a Migrant Worker
It will be interesting to see how the devolved government and assemblies of Northern Ireland, Scotland an Wales respond to this change and whether they follow suit.
So much is happening in the Student Money world at the moment! It’s always dynamic and it can be tricky working out what applies to you, what and why it matters anyway, and should you care?
