"That is the main case why private loans should be discharged," said Mark Kantrowitz, publisher of FinAid.org, a provider of student aid information.
There's another big difference between federal and private loans.
The federal program — paid for by taxpayers — has been a long-standing public policy to help Americans get a college education. Students generally can't be turned down for a federal Stafford loan, and they receive the same terms whether they are creditworthy or not. When they repay the taxpayers, the money is available to make new loans.
Private loans, though, are a business and operate under rules designed to protect lenders' interests. Lenders do not have to give a student a loan and can charge riskier borrowers a higher rate. They often require borrowers to get a co-signer, making sure someone else is on the hook if the student can't repay.
There is no loan cap, so young borrowers can get neck deep in debt even for undergraduate degrees. More often than not, when you hear tales of former students buried under six-figure debt, private student loans are involved.
Take the case of Katherine Lord of Milwaukee, who amassed about $140,000 in law school debt — almost all of it in private loans.
"Maybe I didn't do as much research as I should have," she said. "At the time, there just wasn't great counseling on whether or not to take out private student loans."
At that time, too, a law degree guaranteed a good-paying job, and Lord figured she would be able to repay the loans. She graduated from Valparaiso University in Indiana in 2005 and moved to Washington to find a job as a public interest lawyer. That didn't pan out, and Lord's bank deferred her private loan payments for six months. Once that was up, her monthly payments exceeded $800 — more than her rent.
She eventually found temporary legal work but lost the job when the economy tanked and hasn't worked since. Lord, 34, who moved back home to live with her parents, says she has managed to repay nearly all her $15,000 in federal loans. Her parents, who co-signed her private loans, refinanced their house to pay them off.
Congress introduced legislation last year to permit private loans to be discharged in bankruptcy, though it has made little progress.
Lord says the bankruptcy option would help others trapped by private loans with no way to repay them.
"If it had been an option, I know I would have considered it," she said. "I understand just how drastically bankruptcy would affect my life, but at least I would be the one primarily affected, not my parents."