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Fatwa CenterIn principle, you are not permitted to take a Riba-based loan
Question
Assalamu Alaykum great scholars. I live in Norway where students at College/University can get student loans. The loan is interest free in the study period, and actually turns into a scholarship/stipend (free money) at the end of the semester if all the exams get passed. If we fail the exams it is still an interest free loan that can be turned into a scholarship/stipend if we pass the courses within one year. If we quit the study, or after graduation, or we no longer receive loan/stipend, and we still have a debt left, only in these three circumstances interest will be added. Is this loan that turns into a scholarship/stipend Halal for me to take? Please bear in mind that I will complete a Bachelor's degree before the summer vacation InshaAllah, and have not failed a single course in the degree yet and I find it unlikely in the future also. So I believe it will turn into a scholarship/stipend if I apply for next year when I plan to take my Master's degree. And if, for some reason, I will fail an exam continously or have to quit studiyng, I have enough money to pay them back immediately. I don't take this loan because it is a loan since I don't need a loan, I only take it since it becomes a scholarship/stipend (free money) after the exams. Please give a Fatwa clarifying if this is allowed or not. Jazakallahu Khayran.
Answer
All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad 
is His slave and Messenger.
The reality of this loan as we understood from the question is that it is a loan based on Riba (interest and/or usury) but with the promise of considering it as a gift in case that the student succeeds in his/her studies, or waiving the interest in another case. Indeed, this does not change its reality, and we have already explained that in principle it is not permissible to enter into any contract that involves Riba even with the intention of avoiding the reasons that would lead to it.
For more benefit, please refer to Fataawa 98959 and 88473.
This is because the mere act of signing the contract that involves Riba and accepting it is not permissible if one does so willingly.
However, if a person is obliged by necessity to do that, then he is not sinful as Allaah Says (what means): {He has explained in detail to you what He has forbidden you, excepting that to which you are compelled.}[Quran 6:119]; but he should be determined to avoid the interest and pursue every possible means to do so.
Allaah Knows best.
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