The Tories want to introduce interest-free loans for students!
Oh no wait, it’s not for all students.
A new system of “Sharia-compliant” student loans is to be launched to allow more Muslim students to go to university, it has been announced.
David Willetts, the Universities Minister, said an alternative financial model was being created to satisfy Islamic law that forbids Muslims taking out loans that make interest.
Under the system, students would apply for taxpayer-backed loans but repay them into a mutual-style fund that would be ring-fenced to provide future finance to other students with the same religious beliefs.
The move will raise concerns over a two-tier system in which Muslim students pay less than other undergraduates.
But the Government insisted it would be set up in a way that ensured repayments were made at the same rate as students who take out traditional student loans.
How? How can that work? If the loans are “sharia-compliant” and thus don’t make interest, then how can they not be cheaper than non-sharia-compliant loans that do make interest? If you take interest out of the equation, then loans become free, which is obviously cheaper than not free. Interest is the cost of borrowing; no interest, no cost.
Is the idea to rig it in such a way that the students with sharia-compliant loans do pay for the loans but in a way that’s not called “interest”? That seems…childish.
The plans have been set out in a consultation document published by the Department for Business, Innovation and Skills.
It says the Student Loans Company will create a completely new fund based on the “Takaful” structure used in Islamic finance – allowing groups of people to cooperate to provide mutual finance assistance to other members of a group.
Students will borrow up to £9,000 a year to cover tuition fees and start to repay when they earn more than £21,000 – the same as the traditional model.
The document says: “The principles of Sharia law recognise the value of money over time. Given the long period over which most students would make repayments into the fund, the total contribution they would be obligated to make would be based on a benchmark.
“This benchmark would be set relative to the traditional loan system and would ensure that students who made use of either the alternative finance product or traditional loans would be treated the same.”
So it’s basically just repackaging. “Based on a benchmark” is a roundabout way of saying “interest.”
Let’s start thinking up some atheism-compliant stuff we need.