Investment ; permissible ? : education trust funds

Fatawa Question

Assalamu'Alaikum Dr Kahf I hope and pray you are well. I was wondering what are the scholarly opinions on the permissibility of educational trust [ET] plans ? Specifically, we have a local state [government] trust plan-a contract you purchase from the state government. You pay todays tuition in full and in return receive 80-100 % of the tuition [depends] when the child attends college in the future. The ET does not allow you to choose how the guarantee is funded, but they tell you that they will invest in a mix of equity and bonds, progressively increasing in bonds towards the payout date, to meet the contract guarantee. The question : where does the ET stand Islamically ? Specifically on 2 fronts : 1. Is the ET a forward contract ? If so, is it one of those that is allowed or not allowed ? 2. Are we liable for how a contract is fulfilled ? Or are we not liable for how the counter party goes about fulfilling its end of the contract ? [In this case, the argument would be that we just purchased a guarantee / contract. It’s the government's problem how they fund the contract, and in any case, we have no control over it]. The specific education trust I am referring to is the Michigan Education Trust (MET). Details are found on their website at : http://www.michigan.gov/setwithmet/0,1607,7-237-43437---,00.html The trust is administered by Michigan state government. You purchase a contract today for say $ 50.000. In 15 years’ time [for example], your child will be going to college. The MET will then pay you whatever the tuition costs are at that point in time. So you are pre-purchasing the undergraduate tuition costs. In the event the child does not go to college, or gets a full scholarship, the initial purchase price is refundable. The MET discloses in its annual report that it invests in mixture of stocks and bonds, and as the contract gets closer to the payout date, the portion of fixed income investment increases to 100 %. Is this sufficient detail ? Your thoughts and response would be greatly appreciated Jazakumullahu Khairan Wassalam Nadeem

Fatwa

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Publication Date

2010-06-22

Main Subjects

Financial and Accounting Sciences
Religion
Islamic Studies

Topics

• Islamic jurisprudence
• Education
• Contracts
• Prices
• Income
• Investments
• Costs
• Purchasing
• Mutual funds

No. of Pages

2

Data Type

Fatawa

Language

English

Record ID

BIM-734403

• APA
• MLA
• AMA