Banks are a little smarter than the government, they tend not to like to loan tens of thousands of dollars in unsecured and uninsured loans by the government which can be wiped out by declaring bankruptcy. The government on the other hand isn't as smart and will lend money to anyone regardless of showing any ability to pay it off or have securities. Banks would have to be idiots to have the same percentage rates as the government for this reason. Banks cannot simply just tax the public more when people fail to pay off their student loans....so yeah, the competition is quite uneven and the rates charged aren't going to be competitive.