Yes, zakat can be used to help a student pay off their loans, provided the student is considered zakat-eligible. This eligibility is determined by assessing whether, after deducting their loans, the student's net assets fall below the nisab threshold—the minimum amount of wealth one must have before being liable to pay zakat. It should be noted that there is a difference of opinion on how much of a long-term loan should be deducted. For details, please see here. If, after accounting for their debts, the student meets the criteria of being poor and needy, it is permissible to give zakat money to them.

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Understanding Zakat Eligibility

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To determine if a student is eligible for zakat, one must consider the following steps:
1. Calculate Total Assets: The student should list all their assets, including cash, savings, investments, and any other valuables they possess.
2. Assess Debts: Next, the student must account for all their debts, including student loans and any other financial obligations they have.
3. Net Assets Calculation: Subtract the total debts from the total assets to find the net assets.
4. Compare with Nisab: Compare the net assets to the nisab threshold. The nisab is approximately 85 grams of gold or its cash equivalent. If the net assets are below the nisab, the student is considered zakat-eligible.
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Example Calculation

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Let's take a practical example to illustrate this process:
• Total Assets:
   ◦ Cash: $500
   ◦ Savings: $1,000
   ◦ Investments: $2,000
   ◦ Total Assets = $3,500
• Total Debts:
   ◦ Student Loans: $10,000
   ◦ Other Debts: $1,000
   ◦ Total Debts = $11,000
• Net Assets:
   ◦ Net Assets = Total Assets - Total Debts
   ◦ Net Assets = $3,500 - $11,000 = -$7,500
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In this case, the student's net assets are -$7,500, which is well below the nisab threshold. Therefore, the student is considered zakat-eligible.
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Permissibility of Using Zakat for Loans

Once it is established that the student is zakat-eligible, zakat can be used to help them pay off their loans. This is because the primary purpose of zakat is to support those in financial distress and alleviate their hardship. When a person's debts are significant enough to reduce their net wealth below the nisab threshold, they are deemed financially vulnerable and eligible for zakat.
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Scholarly Consensus

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The consensus among scholars is that zakat can be given to those who are in debt, provided they meet the zakat eligibility criteria. This is based on the Quranic verse:
"Zakat expenditures are only for the poor and for the needy and for those employed to collect [zakat] and for bringing hearts together [for Islam] and for freeing captives [or slaves] and for those in debt and for the cause of Allah and for the [stranded] traveler - an obligation [imposed] by Allah. And Allah is Knowing and Wise." (Quran 9:60)
The phrase "for those in debt" clearly includes individuals who are burdened by financial obligations, such as student loans. Thus, if a student’s debt situation renders them zakat-eligible, it is permissible and even commendable to use zakat to help them pay off their loans.
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Conclusion

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In conclusion, zakat can be used to help a student pay off their loans if, after deducting their debts, their net assets fall below the nisab threshold. This determination of eligibility ensures that zakat fulfills its purpose of supporting those in need and alleviating financial hardship. By providing zakat to a student in such circumstances, one not only helps relieve their financial burden but also supports their educational pursuits, which can have long-term benefits for both the individual and the community.

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