Asked by
To ask His Majesty's Government what progress they have made
towards the introduction of a Sharia-compliant student finance
product.
The Minister of State, Department for Education ( of Malvern) (Lab)
My Lords, we are committed to delivering an alternative student
finance product that is compatible with Islamic finance
principles as quickly as we can. We are making good progress to
achieve this. This month we are reconvening the alternative
student finance working group for its first meeting since the
election, which I am grateful to the noble Lord for being part
of. We have also appointed a secretariat to take forward the
sharia certification of the product.
(LD)
My Lords, Muslim census research shows that over 6,000 students
annually miss out on university entirely due to the lack of
sharia-compliant finance. I know that the Minister is alive to
the problem, its scale and its 11-year history. I thank her and
her predecessor, the noble Baroness, Lady Barran, for the work
that they have done or are doing in moving the alternative
student finance project forward. However, progress is slow,
largely because ASF is being produced sequentially to the
lifelong learning entitlement, which is delayed in the Budget by
a year. What is now the latest date for the full implementation
of the ASF? We should surely be able to move faster. Can, for
example, ASF development be uncoupled from the LLE and progressed
in parallel? What consideration has been given to the use of
outside contractors to speed things up?
of Malvern (Lab)
I think it would be fair to say that that was the question I
asked at the point at which it was suggested to me that we should
link the delivery of the ASF to the introduction of the lifelong
learning entitlement. I think that the last Government were right
in making that decision, because the lifelong learning
entitlement brings about a fundamental change to the system of
student finance, and it is important that, to be able to access
the alternative student finance provisions effectively, they are
linked to the overarching system for student support. We are
introducing the lifelong learning entitlement for applications
from September 2026 and for courses and modules that begin from
January 2027.
(Con)
My Lords, will the Minister say what the Government are doing to
raise awareness of sharia-compliant finance to all students and
what training is being offered to those that work in this
sector?
of Malvern (Lab)
For students, we are raising information about, for example,
degree apprenticeships that would allow students to study towards
a degree while they work, without paying for tuition. Students
can also find information on other forms of support on GOV.UK,
including bursaries, scholarships and awards for eligible
students to ensure that, as the noble Lord pointed out, we help
to make progress for the about 6,000 students per year that the
Muslim census suggested might not be able to access higher
education because of the nature of mainstream student
finance.
(Lab)
My Lords, I commend the tenacity of the noble Lord, , in pursuing this issue, which
I know he has been raising since 2012. I recall being in debates
with him on what became the Higher Education and Research Act
2017, when it seemed that a solution was close to being found.
Yet, as he said, many young Muslims have a barrier to higher
education because of this, and those who go to university none
the less suffer severe financial hardship. But I disagree with
him and say to my noble friend that, rather than separating the
need for a sharia-compliant loan to be found and the lifelong
learning entitlement, the lifelong learning entitlement's rollout
from 2026 should be used as a backstop. If it is not available to
young Muslims, it cannot properly meet the reason that it is
being established.
of Malvern (Lab)
My noble friend is right. That is why, in working towards the
lifelong learning entitlement rollout, we will also be making
progress towards delivering the alternative student finance. We
will be able to look at the details about the progress that has
already been made and the steps we still need to make in the
working group, which I am glad that the noble Lord, , will be able to attend.
of Drumlean (Con)
My Lords, I am grateful to the Minister for answering my Written
Question as to what the nominal value of student debt will be. In
her answer, she said that, in five years' time, the cumulative
total debt will be £540 billion and, in 10 years, £869.4 billion.
I understand that this is being used to kind of create more
headroom for the Government's borrowing. Is she really satisfied
with student debt soaring to those levels?
of Malvern (Lab)
I am not sure whether the noble Lord is arguing for a wholesale
reform of the student funding system—it would be legitimate if he
were, although this Government have taken a different route at
this point. I think it is important, notwithstanding the impact
on the national finances, to be clear for individual students
that an increase in their tuition fees and the loan they take out
to fund them will not increase their repayments, because
repayments of this loan are wholly linked to earnings levels, so
no student will repay higher levels per month as a result of the
most recent decision that the Government have taken to increase
tuition fees.
(CB)
My Lords, interest rates are not only a problem for Muslim
students. Can the Minister explain why it is appropriate that all
students should pay a rate of 7.3%, which is somewhat usurious,
for the period in which they are studying?
of Malvern (Lab)
Obviously, we keep interest rates, which are linked to the RPI
for student finance, under review. But in principle, as far as
the student finance system is concerned, it is right that
students who continue to get considerable benefit from higher
education help to fund that higher education, alongside the
taxpayer, who also of course stands behind the loan system. At
the end of the period of its term, a loan will be written off for
any student who has not repaid by that point.
(Con)
My Lords, in welcoming the continuation of the initiative of the
previous Government, it is also important that the principle of
takaful, which is inherent in Islamic finance, is also made
abundantly clear to the community. Building on my noble friend's
question on the issue of communicating, it is a barrier to entry
and to higher education, particularly for young girls. These
girls are often very high attainers.
of Malvern (Lab)
The noble Lord makes a very important point. Perhaps I was not
clear enough in response to his noble friend. Part of the work
that we are doing is to engage with the Muslim community, firstly
to ensure that the plans the Government are putting in place will
be sharia-complaint and acceptable to the community, and also to
ensure that the message about the ability to take up this student
support in order to be able to undertake higher education is
properly communicated. We are absolutely committed to continuing
with that engagement, including with Islamic finance
specialists.
(Con)
My Lords, can I ask the Minister what the Government will be able
to do to help prospective and existing students understand what
their loan commitments mean for them? I have had recent
experience with my own children and their friends, who had no
idea what they signed up to several years ago.
of Malvern (Lab)
I think the Student Loans Company works quite hard in order to
ensure that students understand the commitments that they are
taking on with student loan finance. But it is a fair point that
it is important not just for the Government but for higher
education institutions to be clear with students about what they
are getting for their money, and then for us and the Student
Loans Company to be clear with students about the impact later on
in their life of the loans they are taking out.
I will reiterate the point I made earlier that sometimes there is
confusion among students, who think that student debt is similar
to other forms of debt, when clearly it is very different.
Repayment is linked to earnings levels and, at the end of the
term, any remaining debt will be written off. I try to say that
as frequently as possible. It is a fair challenge that we should
ensure that as many students as possible understand that that is
the situation with student debt.
(Lab)
Would my noble friend the Minister recommend that anyone who is
confused should go on Martin Lewis's website? He is very clear
about this and it might help them to understand precisely what
the scheme is all about.
of Malvern (Lab)
My noble friend is absolutely right and I am pleased to say that
I will be meeting with , who does a sterling job of
explaining not just this but many elements of finance. I will be
keen to hear from him what more he thinks we should do to make
the position clear.
