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NELFUND and the Ethics of Student Loans: An Islamic View

In a country where education often feels like a luxury rather than a right, the launch of the Nigerian Education Loan Fund (NELFUND) has brought a sense of hope to many students. It promises an interest-free loan scheme to help undergraduates who struggle with tuition and living costs. On the surface, it seems like a thoughtful intervention, and to be fair, it is.

But as Muslims and students, we cannot help but reflect on what Islam says about borrowing. The idea of taking a loan, even one without interest, is not something our faith takes lightly. Debt in Islam is not just a financial issue; it is a moral and spiritual responsibility. So while NELFUND might offer relief for today, we must ask: are we also preparing young people for the burden of repayment tomorrow? And are we normalizing a culture of borrowing that Islam encourages us to avoid unless absolutely necessary?

So, while NELFUND may seem like a step in the right direction, especially because it avoids interest, our position as Muslims should be clear: debt, even without interest, should never become a normalized or easy option. Islam permits borrowing, but only when it’s truly necessary and not just convenient.

And that's where our concern lies. We are stepping into a phase where student loans might start to feel like a “default setting” — something you just take because it is there, not because you have exhausted all other means. And Islam does not support that kind of mindset. The Prophet Muhammad (peace be upon him) did not just warn against riba (interest); he also prayed frequently for protection from debt. One of his well-known supplications was, “O Allah, I seek refuge with You from sins and from debt.” (Sahih Bukhari)

Why? Because debt affects a person’s dignity, freedom, and even their peace of mind. In fact, he once refused to lead the Janazah (funeral prayer) of a man who died owing debts until someone offered to settle it. That teaches us something deeper: debt is not just financial, it is spiritual and moral.

Now imagine a student takes this loan with the hope of a better life. But after graduation, they face the harsh Nigerian job market – months, maybe even years, without steady income. Even though the loan is interest-free, the pressure to repay in a broken economy can weigh heavily. That is not just a policy issue, but also a moral one. Islam emphasizes intention and capacity when it comes to taking on any responsibility.

So yes, NELFUND might offer a form of relief, but it also invites a serious question: Are we helping students grow, or slowly turning them into borrowers by default? Islam teaches us to avoid debt unless we have no choice, and when we do take it, we must treat it with utmost seriousness and urgency. That’s the position we must hold.

That said, if we truly want to support students without putting them under the shadow of repayment, maybe it is time we looked deeper into Islamic alternatives. Islam does not just warn about the risks of debt, it also offers beautiful, community-based solutions like zakat, sadaqah, and waqf.

If part of our national budget or private sector contributions went into a zakat-style fund strictly for education, it would provide help without the pressure to pay back. Zakat is one of the pillars of Islam, and one of its eligible categories is "those in debt" or "those striving in the path of Allah” — and surely, seeking knowledge fits that purpose.

Historically, institutions like Al-Azhar University in Egypt were funded through waqf (Islamic endowments), allowing students to learn freely without the burden of repayment (The Oxford Encyclopedia of the Islamic World). There was no loan, no paperwork, just knowledge passed down freely.

This is not to say NELFUND should be scrapped. Not at all. But maybe it can be blended with Islamic values — a part loan, part grant system. For students from very poor backgrounds, why not offer non-repayable support funded by zakat or national endowment? For others, make loans a last resort, not the first option.

The goal is to educate without burden, empower without pressure. And that is exactly what Islam wants for us; to lift each other up, not loan each other into stress.

In all of this, our stance remains firm: student loans, even interest-free ones like NELFUND, must not become the default solution to educational challenges. Islam urges us to approach debt with caution, not comfort. We cannot afford to create a system where young people begin adulthood with the weight of repayment hanging over them, especially in a country where job security is uncertain.

This is a moment that calls for reflection, not just from students, but from policymakers, scholars, and the public. Can we build an educational support system rooted in justice, mercy, and sustainability? Can we explore Islamic alternatives like zakat, waqf, and structured grants that align with our values and reality?

As we move forward, may we not only seek solutions that work, but ones that also honour our faith, protect our youth, and secure our future.