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.
Finding investors willing to take less than 5% return (after paying for overhead and uncollectable loans being written off due to death/injury/ability to pay/etc) would probably be the primary one. You would likely be offering more or less the same or worse rate as I could get on a 10 or 30 year federal bond with more risk associated with it.
I know I’d be completely uninterested in such an investment pitch. It would work better as a charity ask for me.
> Finding investors willing to take less than 5% return
If it’s safe I can leverage it.
> get on a 10 or 30 year federal bond with more risk associated with it
5% is 10 bps over the 20 year. Not a lot. But I picked a round number. Point is why couldn’t it be undercut? If it can’t, easily, it’s correctly priced.
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...