"Progress and Perseverance: The Journey Towards Alternative Student Finance in the UK"

The current student finance system provides financial support to eligible students pursuing higher education in England. This support primarily covers tuition fees, maintenance loans for living expenses, and additional grants or loans for specific circumstances.

The system operates on the principle of income-contingent repayment, where students only start repaying their loans once they earn above a certain income threshold. Interest rates are applied based on the RPI inflation rate and how much a student repays will vary depending on the student’s income levels after studies. The repayment threshold for Plan 5 (the repayment loan issued to new students starting from August 2023) will be adjusted annually by inflation from April 2027.  The current system however has caused financial exclusion for students (Muslims and others) who believe obtaining an interest-based loan for higher education is against their religious beliefs. The ban on (or aversion to) interest is a feature across Abrahamic faiths.

Additionally, individuals from low-income families, lower socio-economic neighbourhoods, or minority communities often face disproportionate challenges. These can include living in overcrowded conditions, experiencing various forms of deprivation, and encountering barriers to educational achievement. When access to higher education becomes more restricted, these groups tend to be the most severely impacted. For many in these situations, obtaining a degree that opens doors to quality employment opportunities can be a crucial stepping stone. It often serves as a powerful tool to break cycles of disadvantage within families and communities, potentially improving prospects for current and future generations. Although it may be argued that higher education is not the only path to success, vocational training, entrepreneurship, and other alternative routes can also play significant roles in improving socioeconomic outcomes. The key is ensuring equitable access to a range of opportunities that can lead to financial stability and improved quality of life. To ensure every British citizen has equal access to higher education, the journey to introduce Alternative Student Finance (ASF) began with the Prime Minister announcing this in 2013.

ASF is designed to provide a Sharia-compliant alternative to traditional interest-bearing student loans. It will be open to all eligible students regardless of faith. It is intended to cover tuition fees and living costs for eligible higher education courses, much like conventional student loans. Instead of charging interest, it uses a model based on the Islamic finance principle of Takaful or ‘mutual guarantee’. Students will receive payments to support their education whilst guaranteeing to repay amounts in the future once the graduate’s income reaches the relevant agreed upon threshold. This means ASF repayments will be based solely on what people earn, like the existing loan based system. The repayment amounts are calculated to ensure that students using ASF repay the same amount they would have under the existing loan based system.

The Islamic Finance Council UK (UKIFC) has been at the forefront of supporting the development of ASF in the United Kingdom. It was formally appointed in 2017 and has been assisting the Department for Education (DfE) since. This blog post outlines the key milestones in this journey, highlighting the progress made and the challenges faced in developing a Sharia-compliant student finance option.

Here’s a comprehensive look at the ASF milestones achieved on this journey.

The Early Stages (2010-2013)

In 2010, the need for an ASF system was identified, leading to initial discussions and proposals for changes in the existing student loan system. The following year Baroness Verma announced that the government was investigating the possibility of introducing an ASF, working with key organisations such as the Federation of Student Islamic Societies and the National Union of Students (NUS).

The Government’s higher education reforms introduced changes to interest rates on student loans and increased the tuition fee cap to £9000 per year, posing significant challenges for many in the Muslim community in 2012. This led to a coordinated campaign by Muslim organisations and the NUS to raise awareness of the negative impact of interest-bearing loans.

At the World Islamic Finance Forum in 2013, Prime Minister David Cameron MP promised to introduce a student finance system compatible with Islamic principles, ensuring that no Muslim student would be deterred from pursuing higher education due to financial constraints.

Consultation and Legislative Steps (2014-2017)

In April 2014, the government launched a ten-week consultation to gather opinions on a Sharia-compliant alternative finance product. Just under 20,000 formal responses and 68 comments were received. The overwhelming support led to the decision to adopt a mutuality based “Takaful” model for ASF. This would provide an alternative structure compatible with Islamic finance principles offering student finance on the same terms as existing student loans thereby ensuring complete parity for all students.

The publication of the Green Paper “Fulfilling Our Potential” in 2015 and the White Paper “Success as a Knowledge Economy” in 2016 provided further justification for the creation and adoption of an alternative student finance solution. The initial bill was accompanied by an Impact Assessment which highlighted the benefits of having an ASF.

As part of the legislative process, Lord Sharkey submitted an amendment that would hold the government to quarterly reports on ASF development. Lord Sharkey had noted, “…my amendment would require the Secretary of State to tell all relevant schools about the progress being made and to give an estimate of the likely date of availability.” He further stated “my amendment simply asks the Government to say when this conflict between faith and funding will be resolved. This was pressed to a vote but lost narrowly, by 227-225.

The Higher Education and Research Act gained royal assent, securing the powers to introduce ASF. The Act marked a significant legislative milestone. To enable the government to implement an extra student financing model called “alternative payments” that would not include interest,  Sections 86 and 87 of the Higher Education and Research Act were passed in April 2017.

Development and Advocacy (2017-2022)

The DfE commissioned a study to support ASF development and appointed the UKIFC in October 2017 to help design an ASF model. The then Prime Minister, Theresa May MP, commissioned a review of post-18 education and funding in February 2018 (the Augar review). This wholistic review had a material impact on the timeline to introduce ASF.

In May 2019, DfE published an ASF research report highlighting positive perspectives on ASF from current and future students. In the same month, the findings of the Augar review were released which further highlighted reasons to have the ASF. There was a further debate on ASF in July 2019 at the House of Lords where the late Lord Sheikh who had also been the Co-Chair of the All-Party Parliamentary Group on Islamic Finance emphasised the need to fulfil the commitment made by David Cameron highlighting the considerable delay to date.

Following COVID-19, in 2021 the collaborative advocacy efforts from the Muslim community and NUS reignited due to the concerns and disappointment with the delays. The Muslim Census released the results of its online survey in October 2021 which revealed that over 12,000 students annually were negatively impacted by the lack of ASF. The Equal Access to University Education campaign was initiated by a coalition of Muslim charities and community organisations to advocate for ASF principally led by Asha Hassan and supported by Stephen Timms MP, Lord Sharkey, and others.  They made a call to the then Prime Minister,  Boris Johnson MP, to ensure ASF was rolled out by September 2022.

In February 2022, the government gave a conclusion to the Augar Review and confirmed that it will consider if and how ASF can be delivered as part of the Lifelong Loan Entitlement (LLE) which was a key recommendation of the Augar review. An opportunity in an accountability hearing in June 2022 of the universities minister led to a public commitment to introduce ASF alongside the LLE in the 2025/26 academic year pending consultation results.

Recent Developments (2023-2024)

The government published the outcome of the LLE consultation in March 2023 and confirmed that ASF will be delivered as soon as possible after the introduction of the LLE and emphasised its commitment to ensuring the availability of ASF, although it would not be delivered at the launch of the LLE in 2025/26 as previously hoped.

A government policy paper and blog post announced plans for ASF with UKIFC being contracted to provide advisory service. The Student Loans Company (SLC) began work on the ASF project pre-discovery with the UKIFC being appointed to support it in May 2023. This signalled the start of concrete development efforts towards operationalising ASF. Baroness Barran MBE [then Parliamentary Under Secretary of State, Department for Education] provided an update in September 2023 reflecting revived commitment from government,  and highlighting that she was meeting on a quarterly basis with legislators, leaders of the Islamic community, the SLC and the UKIFC to discuss the government’s progress to provide ASF as soon as feasible. She provided another update in a letter to the House of Lords in December 2023.

The SLC discovery phase of the ASF project ended in March 2024, marking a crucial step towards the implementation of ASF.

Looking Ahead

The journey towards establishing ASF has been long and eventful, marked by significant milestones and persistent advocacy. Disappointingly, over a decade from the first announcement we are not there – yet!  Introduction of ASF remains a significant step towards ensuring that higher education in the UK is inclusive and accessible to all, respecting the diverse beliefs and needs of its student population.

Key milestones including the legislative amendments and the completion of the SLC ASF discovery phase, are important milestones towards making this long-awaited finance option a reality. It is hoped that the new government will continue and successfully get ASF over the finishing line promptly.

ASF will not only benefit some Muslim students but also contribute to greater financial inclusion in higher education across England which in turn will help drive economic growth. It remains imperative for DfE and SLC to set a specific deadline to avoid leaving students in uncertainty. Additionally, Scotland and Wales should promptly develop plans for implementing ASF-equivalent options.

ASF TIMELINES

1. 2010 – Changes in student loan system proposed.
2. 2011 – Baroness Verma stated that the government was ‘ investigating the possibility of introducing an alternative finance system and were working with organisations such as the Federation of Student Islamic Societies and the National Union of Students https://www.theyworkforyou.com/lords/?id=2011-11-01a.1203.0  (Paragraph 5 ).
3. September 2012 – The Government’s Higher Education reforms (introduced changes to interest rates on student loans and an increase in tuition fee cap to £9000 per year). Following the Brown Review posed problems for many in the Muslim community. This meant that the more affordable £3000 pa tuition fee cost was trebled with the addition of real interest.  This was highlighted via a co-ordinated campaign by Muslim organisations and NUS to raise the profile of the harm interest-bearing loans could cause some students and their families.
4. October 2013 – David Cameron MP promises (at the World Islamic Finance forum) to introduce a system of student finance compatible with the principles of Islamic Finance. He stated ‘’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.’’
5. April 2014 – Government launched a ten-week “Sharia-compliant Alternative Finance Product” consultation in April 2014. The goal of the consultation was to gather opinions on the acceptability of an alternative finance product based on the Takaful Model from students, Muslim communities, and the public. The consultation closed in June 2014. According to the Government, 19,886 formal responses and 68 comments (via a designated email address) were received. The responses were from individuals, academicians, charities, business representatives/trade unions, and business owners. Responses were made online through a survey monkey link.
6. September 2014 – Government issued its response in September 2014 committing to introducing ASF due to overwhelming support in the consultation and concluded that a ‘Takaful’ system will be most suitable for ASF.
7. November 2015 – Government published Green Paper (Fulfilling Our Potential).
8. May 2016 – Government published White Paper (Success as a Knowledge Economy) which provided more justification for the creation and adoption of an alternate student financing solution.
9. June 2016 – The initial bill was accompanied by an Impact Assessment which highlighted the benefits of having an ASF.
10. March 2017 – As part of the legislative process, Lord Sharkey submitted an amendment that would require the government to make quarterly ASF progress reports. This was pressed to a vote but lost narrowly, by 227-225.
11. April 2017 – Higher Education and Research Act gains royal assent (powers to introduce ASF were secured). In order to enable the government to implement an extra student financing model called “alternative payments” that would not include interest,  Sections 86 and 87 of the Higher Education and Research Act were passed in 2017.
12. August 2017 – The DfE commissioned a study to support the development of ASF.
13. October 2017 – Specialist advisers, the UKIFC, were appointed in October 2017 to help DfE design an ASF model.
14. February 2018 – Theresa May MP commissions a review of Post-18 Education and Funding.
15. May 2019 – DfE publishes ASF research report (Current and future students’ perspectives) which sought to analyse the experiences of Muslims who took out student loans and those who did not, as well as those who did and did not enrol in higher education. The study discovered that several interviewees’ opinions on interest and personal money were significantly influenced by their religious beliefs. It also reported that ‘‘Individuals are overwhelmingly positive about the ASF model, feeling it is attractive to them, and will be attractive to their families, friends, and community and thus encourage more Muslim students to go university, particularly those who could be deterred by the need to use interest-bearing loans to finance their studies. They also feel ASF will be attractive to a wider audience, beyond the Muslim community’’. In the same month, the Independent panel report (Augar review) to the Review of Post-18 Education and Funding was released and it further highlighted reasons to have the ASF.
16. July 2019 – There was a further debate at the House of Lords where late Lord Sheikh who had also been the Co-Chair of the All-Party Parliamentary Group on Islamic Finance emphasised the need to fulfil the commitment made by David Cameron.
17. January 2021 – Government publishes an interim response to Augar review.  ‘’The Government is committed to ensuring that all students with the potential to benefit from further and higher education are able to access it. The Government will provide a further update on the ASF product in due course.’’
18. April 2021 – Through Parliament, Lord Sharkey attempted to set a six-month timeframe for ASF after the passing of the Act during the Financial Services Bill Report debate. It did not succeed.
19. May 2021 – Equal Access to University Education Campaign  held a campaign webinar, titled “Boris Johnson – Where are our Halal Student Loans?
20. July 2021 – An adjournment debate led by Stephen Timms MP was held in the House of Commons with the universities minister highlighting the delay and sharing accounts of people who have been unable to attend the university due to the lack of ASF.
21. October 2021 – Spending review took place alongside the Autumn Budget. The collaborative advocacy efforts from the Muslim community and NUS reignited due to the inexplicable delays. The Muslim Census released the results of its online survey in October 2021 which revealed that over 12,000 students annually were negatively impacted by the lack of alternative student financing (ASF). Equal Access to University Education Campaign was initiated by a coalition of Muslim charities and community organisations to advocate for ASF.  They made a call to the subsisting Prime Minister Boris Johnson to ensure ASF was rolled out by September 2022.
22. February 2022 – Government gives a conclusion to the Augar Review and confirms that it will consider if and how ASF can be delivered as part of the LLE.
23. February 2022 – Government launches a consultation on the LLE.
24. June 2022 – An opportunity in an accountability hearing in June 2022 of the universities minister led to the public commitment to introduce ASF in line with LLE in the academic year 2025/26 whilst they awaited the results of the consultation of the LLE. https://www.parliamentlive.tv/Event/Index/03f0d267-f992-4193-9d8f-746930d28032  10.28.37, 10.33.09
25. March 2023 – Government published the outcome of the LLE consultation and confirms that ASF will be delivered as soon as possible after the introduction of the LLE and emphasised its commitment to ensure availability of the ASF, although it would not be delivered at the launch of the LLE in 2025/26 but noted that an update would be available in late 2023.
26. May 2023 – DfE re-appoints UKIFC to provide advice on Islamic finance.
27. July 2023 – Government published a policy paper and blog post announcing plans for ASF in England through an advisory engagement with UKIFC.
28. August 2023 – SLC began work on the ASF project pre-discovery and kicked-off.
29. September 2023 – Baroness Barran stated that she meets on a quarterly basis with legislators, leaders of the Islamic community, the Student Loans Company, and the UKIFC to talk about the measures the government is taking to provide alternative student financing as soon as feasible.
30. December 2023 – Baroness Barran provided an update on Alternative Student Finance in a letter to the House of Lords.
31. February 2024 – The British Board of Scholars and Imams (BBSI) issued BBSI Guidance on Student Finance: Between Prohibition and Lawfulness
32. March/April 2024 – SLC discovery phase complete. ASF will need to follow the introduction of the LLE, as referenced in the letter from Baroness Barran to Peers in December 2023.
33. *April 2024 – ASF remains aligned to Lifelong Learning Entitlement delivery timetable: ASF continues to be developed as part of the wider Lifelong Learning Entitlement (LLE) reform programme, with implementation dependent on the rollout of the LLE
34. October 2024 – DfE appoints UKIFC to undertake the role as the Secretariat for the Islamic Finance Supervisory Board supporting governance and Sharia compliance oversight for ASF.
35. November 2024 – Government updates ASF guidance and confirms revised LLE timeline (2026/27): The Department for Education updates ASF guidance, confirming the Lifelong Learning Entitlement will now be introduced in the 2026/27 academic year, with ASF delivery aligned to this timetable.
36. December 2024 – House of Commons Library publishes updated ASF briefing: The House of Commons Library updates its briefing on ASF, confirming policy continuity and summarising progress on implementation planning and governance structures.
37. June 2025 – Government publishes updated operational description of ASF: The Department for Education publishes updated guidance confirming ASF design features, including use of a Takaful model, equivalence with existing student finance, and delivery through Student Finance England.
38. June 2025 – GOV.UK updates ASF guidance confirming independent Sharia governance structure: Government guidance confirms the establishment of an independent Islamic Finance Supervisory Board to provide Sharia certification oversight for ASF before launch.
39. June 2025 – UKIFC website updated with information on the Islamic Finance Supervisory Board and UKIFC’s role as Secretariat to the Board supporting Sharia certification oversight for the Alternative Student Finance product.
40. April 2026 – Department for Education launches early market engagement for an ASF Student Bank Account. The procurement seeks a banking partner to establish and manage a dedicated account structure to support the Alternative Student Finance model, ensuring funds are handled in a manner compliant with Islamic finance principles, including non-interest-bearing arrangements and FCA-regulated safeguards.
41. July 2026 – ASF remains in development ahead of LLE implementation: ASF has not yet launched and remains dependent on the implementation of the Lifelong Learning Entitlement. Government confirms ASF will be introduced following LLE rollout in 2026/27.

* The below updates were made on 1 July 2026