[ceejayoz]

Yeah, I find this deeply frustrating. Interest rates are supposed to reflect the level of risk, and student loans are deeply low-risk to the lender.

[phil21]

Risk is only one component. Opportunity cost and the time value of money is another.

Risk premium is on top of the other bits.

[JumpCrisscross]

> student loans are deeply low-risk to the lender

Based on the other comment, they absolutely reflect that.

[ceejayoz]

I don't think the other comment is accurate.

edit: Yeah, that other comment is talking about European rates, not American rates.

https://studentaid.gov/understand-aid/types/loans/interest-r...

6.39% to 8.94%, and that's for Federal. Private ones tend to be even higher.

  7/1/21–6/30/22  3.73%
  7/1/20–6/30/21  2.75%
  7/1/19–6/30/20  4.53%
  7/1/18–6/30/19  5.05%
  7/1/17–6/30/18  4.45%
  7/1/16–6/30/17  3.76%

[JumpCrisscross]

Hmm. I wonder why it doesn’t make sense to launch a private lender that offers lower rates.

[ceejayoz]

The Fed rate is too high for the low risk involved.

Private student loans are similarly protected from bankrupcty, and don't have things like income-based repayment; they are, if anything, safer for the lender. https://studentaid.gov/understand-aid/types/loans/federal-vs...

[JumpCrisscross]

Sure. I’m saying why couldn’t you and I start C & J Lenders Inc. and undercut those guys. Say, 5% for a 20-year loan [1].

[1] https://home.treasury.gov/resource-center/data-chart-center/...

[ceejayoz]

Same reason I can't easily start an AT&T/Verizon competitor.

Doesn't mean their pricing is that reasonable, or that funding education should be run this way in the first place. It just means there are big barriers to entry, often established by the existing players to protect their margins. The Fed rate for student loans should be lower.