I'm curious too. The rates aren't particularly generous. Okay, maybe they're a bit lower than the private markets might deliver given the rates of default. And maybe they let you study whatever you want. A private lender might insist on funding economically worthwhile degrees.
The real issue isn't the loan, but the entire system. The colleges have really jacked up the price of a degree. That's the real source of the problem. The interest rates are much closer to the market rates for capital.
I don't know that I'd use the word generous but they do have to advantages relative to other types of loans:
1. A relatively low rate for no collateral. It's never the 2.x% we got on mortgages during the brief window when mortgage rates are good, but compared to other rates you get showing up at a bank with no collateral, they're amazing.
2. Almost guaranteed approval for the above. Can you imagine an 18 year old walking into a bank with no credit history and collateral and walking out with a loan for hundreds of thousands of dollars? Sure, it may be a terrible idea, but a student loan is one of the easiest to get.
But it's for life right? You just can't bankrupt out of repayment, and since its in the US, missing a payment kill your credit score and prevent you from borrowing for anything.
In the 80s-90s in my country, we imported us-style loans, 'revolving credit', that were later called 'credits revolvers' because once you've taken one, a revolver was the only way out (not a joke, I know of 3 people who died in my village from this). We had to allow personal bankruptcy, and once the law was implemented and used, interest rates on those kind of loans doubled, and now they don't exist (although klarna and co are trying).
The real issue isn't the loan, but the entire system. The colleges have really jacked up the price of a degree. That's the real source of the problem. The interest rates are much closer to the market rates for capital.