The University is offering this as an option to pay the semester’s tuition fees in 3 installments rather than at once. So because it is going in installments, they charge a $40 “admin fee”
If there is a payment plan in place over the course of a few months and there is a nominal “admin fee” being charged just one time, is that considered interest?
If not, is it Islamically valid to agree to such a payment plan? Jazakh Allah khair
Bismillahi Ta’ala
Walaikum Assalam Warahmatullah
At the outset, I have assumed this question was about University of Alberta. I have tried to search for this payment plan option and could only fine generic information.
You have stated that, the payment plan is a deferral plan for easy payment option on a monthly basis. However, I have still not been able to find out what is the $40 admin fee for.
If this admin fee is in lieu of a genuine service like clerical charges for duties while securing a payment plan, or paperwork, credit insurance from the university, and then university charges you a one-time admin fee inclusive of all those services, then it will not be considered interest.
However, if it is merely a charge to afford the student an installment plan instead of a one-time payout, then it will be interest and impermissible.
It will not be sufficient to assume that it is an administration fee for services. So clarity must be sought.
For example, the only charge/fee of $40 on University of Alberta website I could find was under installment charge. It says,
“If you wait until the Winter term payment deadline to pay your Winter tuition fees, you will be assessed a $40 Installment Charge. You can avoid paying this charge by paying for both your Fall and Winter tuition fees by the Fall term payment deadline. You will not be charged an installment fee for your Winter mandatory non-instructional fees as long as you paid all your other tuition & fees in the fall.”
From above it seems to be either a monetary charge for opting for an installment payment instead of paying out at once. Thus is would be a riba’ charge and thus impermissible.
If, however, the question is about some other payment plan mentioned in the question, and you have some further information please share that detail for a review.
Wallahu A’lam
And Allah Ta’āla Knows Best
Mufti Faisal al-Mahmudi