Answer
In the Name of Allah, Most Gracious, Most Merciful.
All praise and thanks are due to Allah, and peace and blessings be upon His Messenger.
In this fatwa:
The money you saved is eligible for Zakah. However, you should deduct from it the loan and the educational expenses for the year.
Responding to your question, Sheikh Ahmad Kutty, a senior lecturer and an Islamic scholar at the Islamic Institute of Toronto, Ontario, Canada, states:
The money you saved is eligible for Zakah. However, you should deduct from it the loan and the educational expenses for the year. That is the general ruling of scholars on this issue.
However, another view on this states that you don’t have to pay Zakah on the amount you have kept for paying your essential expenses, including boarding, lodging, and education. Zakah applies only to the wealth saved after paying off those expenses.
This view seems to be more reasonable and conforming to the rationale of the Shariah.
That is the view of some of the f the eminent Hanafi jurists like Ibn Abdin. According to them, you don’t need to give Zakah on it as long as it is set aside for your necessary educational expenses for the upcoming year.
You may follow this ruling. If, however, something of the amount remains in your hands, after deducting the amount of the loans you owe, minus your necessary expenses, you need to take out the Zakah at the rate of 2.5 percent of the saved amount.
Almighty Allah knows best.