Assalaamu alaykum. I live in Australia, and we can have the government pay our university fees whilst we study. When we graduate, we then pay the government 125% of what they paid for us during our studies. Is this considered interest, or just profit? We never get the money, the government just pays the university on our behalf. And then we pay the government at a later date. If we got given the money and then had to pay back 125%, I know that would definitely be interest, but I am wondering if it is also interest in this case. Thank you.

All perfect praise be to Allah, the Lord of the worlds. I testify that there is none worthy of worship except Allah and that Muhammad, sallallahu ‘alayhi wa sallam, is His slave and Messenger.

The fact that the government pays the tuition fees on behalf of the student and records it as a loan for which he is liable after graduation with an added amount of 25% means that this is a loan with interest. There is no difference between that and giving the money to the student to pay the tuition himself. Hence, it is impermissible to take such a loan except in the case of a valid necessity.

Allah knows best.