There are better deals out there if you look at just the interest rates. However, should you or the student have a difficult time in the future paying for the loans, the federal loans offer a lot more flexibilty, such as income based payments, fobearance, etc.
Also, many times private loans will require a cosigner. It has happened in the past where parents have ended up paying for their children's loans if the child dies. That's why if you go the private route, it is advisable to get life insurance on the other party. With a federal loan, the loan dies if you do.
Some families also finance college educations by borrowing against their house. My security gland is too large for me to do that and be comfortable with it. I went with a PLUS loan last year, but this year I am going to try to cashflow. I'm hoping 10 months of sacrifice will be a better choice than 10 years of (much smaller) payments. Many schools have agreements with Tuition Management Systems. You pay a small set up fee ($60 in my case) and pay the tuition/room/board to them over 10 or 12 months. There is no interest charged.
eta: I think your figures are about right for the interest rates on the federal loans. One thing to note, though, is that there is a small fee deducted for the loans, so if you borrow $5000, you won't get quite $5000. Also, there are limits on what the student can borrow. If they are offered subsidized loans, the interest will not accrue while they are in college. If they take the unsubsidized loan, and I believe anyone can borrow $2000 a year regardless of need, the interest will accrue right away and be capitalized into the loan. However, it is possible to pay just the interest on these loans while the student is still in college so that the total will not balloon. Oh, and the interest rates on many of the private loans are adjustable, so it's entirely possible they can rise later.
