It's hard to complain about high interest rates when someone gives you something at a 50% (or more) discount.
It's easy when the thing is priced too high to begin with. Half off egregious = excessive.
Ideally I would like to see private banks making educational loans based on their assessment of individual student risks. Smart kids studying in-demand fields should see very low rates in a system like that. Under-qualified students would pay more, as would students studying fields with lower earning potential. This has an added benefit of discounting the study of fields predicted to be in-demand, and thus better matching educational choices with what our businesses need.
I can tell you don't have much experience in the world of finance.
The primary controlling factors for risk-based pricing in your model would be the co-signers: their credit ratings, debt loads, assets, and earnings. Only when co-signers are not available or cannot be approved due to credit risk will the risk pricing begin to consider student achievement levels, chosen major, etc., as a significantly influencing factor. Obviously, not having co-signers represents elevated risk. Low SES backgrounds are, in and of themselves, a significant risk factor for not completing college. The major as an indicator for future earnings has extremely limited utility, because of the numbers of incoming freshmen who drop out and change majors.
So realistically, you're looking at high-achieving, low-SES engineering majors receiving loans at 17.5%, as opposed to 18.5% for political science, and 19.5% for fine arts.
The low-achieving student majoring in underwater basket weaving gets a loan at 8% with wealthy co-signers.
