Is Prepaid College Tuition Zakatable?

Answered by Ustadh Na’eel Kadi
Question:
Is prepaid college tuition zakatable? We have a scheme in our state whereby one can purchase university credits at today’s price for a young child for use in the future.
Answer:
Wa alaykum salam

I pray you are well. May Allah reward you for your concern and attentiveness to financial matters and the sacred law as well as your children’s education.

One will not pay Zakat on prepaid college tuition.

Zakatable assets include:

(a) Cash – whether in currency form or in the bank,
(b) Gold and Silver,
(c) Money lent out,
(d) Trade goods,
(e) Stocks, and
(f)  Agricultural produce.

Your pre-payment is a fee paid in the present for an educational service in the future. The transaction is an ijara contract which is defined as a [known] payment in return for a [known] benefit (Marghinani, Hidaya).  What makes it unique is the mutually agreed upon early payment and the provision of a refund in case the service is not utilized.

However, if one intentionally tries to avoid paying zakat by purchasing these credits and seeking the refund later, this would be blameworthy.

And Allah knows best.

[Ustadha] Na’eel Kadi

Checked and Approved by Shaykh Faraz Rabbani