Question Summary:
We live in Sydney, Australia, and my wife wants to pursue higher studies in Medicine, for which the government offers an interest-free loan, but with the condition that at the time of repayment any changes that may have occurred in the overall inflation rate will be calculated and added to the amount.

Question Detail:

We live in Sydney, Australia, and my wife wants to pursue higher studies in Medicine, for which the government offers an interest-free loan, but with the condition that at the time of repayment any changes that may have occurred in the overall inflation rate will be calculated and added to the amount. Can you please clarify if this is Halaal or not, i.e. would the inclusion of any non-predicted changes in the overall inflation rate be considered as interest or not

Answer :

In the name of Allah, Most Gracious, Most Merciful
Assalaamu `alaykum waRahmatullahi Wabarakatoh
It is apparent from your query that you are conscious of the strict impermissibility in Shari’a of all interest-based transactions.  May Allah make it easy for you to abstain from unlawful transactions and make it easy to obtain lawful alternatives, Ameen. 
According to the laws of Shari’a, if a person borrows any amount of money, then the original amount will be due upon the borrower.  The rate of inflation will not be taken into consideration.  Therefore, it will not be permissible to calculate the rate of inflation and add it to the original amount due.
Fiqhi Muqalat of Mufti Taqi Usmani (1/53) Memon Islamic Publishers
And Allah knows best
Wassalam
Ml. Ehzaz Ajmeri,
Student Darul Iftaa
Checked and Approved by:
Mufti Ebrahim Desai
Darul Iftaa, Madrassah In'aamiyyah