Why Invest for Education?

Islam requires everyone to seek knowledge and become educated. Higher education costs have been rising at twice the rate of inflation every year and it may not change in the foreseeable future.

The Prophet Muhammad (Peace be upon him) encouraged us metaphorically by saying “Seek knowledge, even in China.” The education of our children is our obligation. We look forward to it with optimism but also apprehension. Skyrocketing tuition, far outpacing inflations makes it necessary for you to plan well ahead. But what are the options? 

Allied Asset Advisors aims to empower its investors to be prepared for the education of future generations while upholding their beliefs. 

Understanding college expenses

Often parents don’t realize that educational expenses are more than just tuition. They may include

Room and board

Commuting expenses

Student activity fees

Lab and other fees

Special equipment

Miscellaneous expenses

Estimated One-Year Future College Costs

Assumes 6% Annual inflation

CURRENT AGE 246810121416 $59,726$53,156$47,308$42,104$37,473$33,351$29,682$26,417 $104,049$92,603$82,416$73,350$65,281$58,100$51,709$46,021 $136,712$121,673$108,289$96,377$85,775$76,339$67,942$60,468 PUBLIC (IN-STATE) PUBLIC (OUT-OF-STATE) PRIVATE

*These estimates have been calculated using the College Cost Calculator at the College Savings Plans Network. If you like, you can calculate the costs yourself, too.

Setting investment goals

if you start investing today

ASSUMING 6 % RATE OF RETURN Estimated cost/year Starting AgeInitial contributionMonthly contributionEstimated cost of collegeSavedShortageAdditional Monthly contribution 20kChild 11$5,000$300$235,597$141,982$93,615$199$499 20kChild 25$10,000$300$186,615$100,737$85,878$261$561 20kChild 310$10,000$300$139,450$61,692$77,758$400$700

The figures calculated are based on a hypothetical scenario. The performance shown is not indicative of any particular investment. Actual results will vary.

Sources to pay for college

Financial aid packages (Federal, State, College)

Not always reliable. Composition may not be halal. Repayment is interest based.

  • Loans (Largest share in the package, repaid, interest based)
  • Grants (Not repaid, need + merit based)
  • Scholarships (Not repaid, limited, competition)
  • Work-Study Jobs (Repaid in terms of work)

You must learn how an Estimated Family Contribution is calculated to determine the amount of financial aid or eligibility.



college savings resources

College Savings Resources

Clicking on the links below will take you to a third party site. The Iman Fund is not responsible for the content, nor does it sponsor any information provided on a third party site.


Family Investments and Savings

This may be your most reliable option. Your investments can be halal and have the potential to grow sufficiently based on the amount you invest.

Private or Foundation Scholarships and Grants

There are thousands of applicants for only a few scholarships or grants. The chances of getting them are often small due to high demand.

Tools for investing in education

Section 529 college savings plans

Tax-free growth. Prepaid tuition plans allow you to buy credits at today’s cost – could be halal. These investment plans are not halal. 

Coverdell Education Savings Accounts (CESA)

Used only for education – could be halal. Learn more about Iman Funds CESA accounts.

Mutual funds and stocks

Diversified, professionally-managed, and offer potential for long term growth. These could be halal.

Islamic Savings Bonds – Sukuk

Fixed income – could be halal.

Custodial accounts

Flexible use of the child’s fund. Can be transferred to another child, however, the funds may only be used for educational purposes.

Earning Tax Credit

Lifetime Learning and American Opportunity.

Financial aid: Estimated Family Contribution (EFC)

Your child’s eligibility for financial aid is based on many factors such as family income, parent and child assets, and investments. An EFC formula using federal institutional methodology is applied to determine EFC or your child’s financial aid need.  

Things to remember!

Best not to rely too much on financial aid

Composition of various investments may not be halal

Scholarships and grants: No guarantee. Apply anyway

Work study jobs must be repaid in work in most cases

Student loans are interest based

choose the option that's “right for you”

StateExpected expensesNoneTax Free Tax freeYes (10%)ParentYes Tax freeYes (10%)ParentYes TaxableNAParentYes TaxableNAChildYes TaxableNAYes –SC 529 SAVINGS ACCOUNT COVERDELL ESA SUKUK/ HALAL BONDS MUTUAL FUNDS CUSTODIAL ACCOUNTS Offered byContribution limit"Eligibility/age,income, residence" Tax benefits - GrowthWithdrawal penalties for non education useAsset TypeHalal options Financial companies$2000/yr per child$186-196k or $118-133k for singleTax Free Financial companiesDiscretionNANo Financial companiesDiscretionNANo Financial companiesDiscretionNANo Distribution