What student loan companies are the best?

Are there private companies that arbitrate student loans (giving loans with lower interest rates than the government), and if so, why are government student loan rates still relevant?

• In a free market economy I would expect everything to settle to maximum "efficiency" as in no room for arbitrage. The government student loan interest rate seems ridiculously high for college students in promising fields, so why doesn't a private company offer loans at a lower interest rate to compete against the government? I would imagine private loaning companies can still make a lot of money if the loan interest rate is at or below 5%, and if they worry about risk, they could interview students, run a credit check, or a myriad of options to try to pick the ones with most "potential" for paying back. If there are companies that do this, then why are government loans still relevant at all if they are not competing with the free market economy (in other words students should be able to get loans from the private companies and just ignore the government)?

• Answer:

  Your premise is false.  No student has good enough credit to deserve a rate on a long-term, unsecured loan under five percent. When you say a "promising field" you are probably referring to something like a degree in engineering.  Consider that an experienced engineer, i.e., someone who has proven herself on the job, could get five percent on her loan only if she puts her house up as collateral.  Without any collateral, she could never qualify for a five percent loan, even with millions of dollars already in the bank. (Loan officer:  "Why do you need a loan with all that cash already sitting there?  Why don't you want to pledge some of that cash or other asset as collateral?"  You see where this line of questioning would lead.) So, if an experienced engineer could not qualify for a five percent loan, it should be apparent that one who is merely beginning a major in engineering (or some similar "promising field") could not possibly qualify for such a loan, especially when you consider that about two-thirds of people who major in engineering don't end up actually getting degrees in engineering, and about half of people who graduate with engineering degrees don't actually end up working as engineers (although, in fairness, they generally--though not always--end up pursuing equally lucrative lines of work).  Some of them work for start-ups in Silicon Valley.  How many start-ups qualify for unsecured, long-term loans of under five percent?  That's right. So why would any hot-shot engineering employee of such a firm qualify? Yes, engineering students are among the least risky to loan money to.  But five percent is still too low a rate for them. The government can provide the subsidy implied by those rates (to all majors) because it isn't their money they are giving away, and they don't care who gets saddled with the obligation. No for-profit institution could be so generous--or so callous.