Zakat is an obligation upon all eligible Muslims. It is a mandatory charitable contribution required to help those less fortunate. The third Pillar of Islam, Zakat is an essential component of Islam and it must be paid on a yearly basis by every Muslim whose total annual wealth either meets or exceeds the nisab threshold.
As a general rule, the guidelines surrounding the eligibility and payment of Zakat are fairly straightforward. However, for students, it can be difficult to find relevant information specifically for their circumstances.
Are student loans Zakat eligible? Do I pay Zakat on my student loans? These are just a few of the questions that you might be asking, but if you’re a student struggling to find the answer to these questions and more, we’ve outlined everything you need to know in the below guide.
Zakat is the third Pillar of Islam and it is a compulsory annual duty where all eligible Muslims must pay a set percentage (2.5%) of their total wealth to those in need each year. It’s also worth keeping in mind that Zakat is a compulsory contribution as opposed to a gift or donation given purely out of kindness.
You can find out more about Zakat here.
All eligible Muslims must pay 2.5% of the value of their total wealth and savings above the nisab each year. The amount of Zakat that must be paid will vary depending on the individual’s income and the value of their applicable possessions.
To calculate your own Zakat and work out exactly how much you need to pay, you can use our handy Zakat calculator.
Zakat can be paid at any time of year, but the easiest way to keep track is to record the date when your total wealth first met the nisab value. It’s then easy to note that your Zakat will be due exactly one lunar year from that date, providing that your total wealth still meets or exceeds the nisab threshold.
However, many Muslims choose to pay their Zakat during the Holy month of Ramadan because the rewards for performing good deeds during Ramadan are greatly multiplied.
Zakat is a compulsory contribution for all sane, adult Muslims whose total annual wealth meets or exceeds the nisab. For students, this means that you must pay Zakat if your wealth meets the nisab after taking your loans, possessions, and savings into account.
Zakat can only be given to those who meet one or more of the following groups outlined in the Holy Qur’an:
Paying Zakat is a blessed way to help those in need whilst following the wishes of Allah (SWT). Zakat is a fundamental element of Islam and its importance is referenced multiple times throughout the Holy Qur’an.
Zakat helps to create a more equal, balanced society and allows those who have been blessed with good fortune to support their less fortunate brothers and sisters across the world. The global ummah benefits greatly from the distribution of Zakat, helping to promote faithfulness and success in communities around the world.
We give Zakat in order to acknowledge that all our wealth and material possessions belong to Allah (SWT) and when we pass away, we cannot take them with us in the Hereafter. By remembering this, we can use our own good fortune to help those in need by giving Zakat. Not only are we following the wishes of Allah (SWT), but we are also learning self-discipline and freeing ourselves from the negativity of greed and materialistic desire.
It can be tricky to find information relating specifically to the rules surrounding Zakat for students and those with student loans, but it’s important to make sure your figures and workings are correct when you are calculating Zakat. Do you include student loan fees in your liabilities? Do you give student loan on Zakat contributions? This is why we have put together this handy guide to help you out.
If you have taken out a student loan to cover the cost of your tuition fees or living costs throughout the duration of your study, it’s important to make sure that you factor this into your Zakat calculation correctly.
Under the current student loans system in the UK, loans are recovered through a repayment system based on income and amount borrowed. Therefore, the amount that needs to be paid back will depend on the original amount borrowed, plus interest on the loan. Once a graduate’s income meets or exceeds the repayment threshold, they will be required to start repaying their loan in instalments calculated based on their income and the value of the loan.
Taking the above guidance into consideration, you can then apply it directly to your Zakat calculations. If a Muslim graduate is earning less than the repayment threshold, then his or her student loan should not be added to the liabilities section when calculating Zakat. This is because the loan is not required to be repaid, in this scenario, so it does not constitute a basic necessity.
However, if a Muslim graduate is earning equal to or more than the repayment threshold, the percentage of the loan repaid during that Islamic year should then be added to the liabilities section. As before, the rest of the outstanding loan amount should not be added to the liabilities section for that year’s Zakat calculation.
If you have had to dip into your overdraft during your studies, this will need to be factored into your Zakat calculation. The general principle is that any outstanding debt should be deducted from your total wealth. If the remaining portion of wealth still meets or exceeds the nisab, then Zakat is due.
However, as with student loans, if you have a large debt or significant overdraft that you are paying off in instalments, then you should only deduct the instalment/s that are due in that lunar year.
Of course, for specific questions or queries relating to your individual circumstances, we would always recommend seeking the advice of your Imam.
Once you have calculated the amount of Zakat you must pay, the next step is to make your contribution and fulfil this important Pillar of Islam.
Pay your Zakat with Muslim Aid and reap the rewards of giving, safe in the knowledge that your contribution will be going directly to those in need across the world. To give Zakat is to support your vulnerable brothers and sisters and strengthen your relationship with Allah (SWT), so please donate today and ensure your contribution makes a difference.