As President Obama takes to TV and Tumblr to stump for his program to make federal student loans more affordable, there’s another $150bn problem lurking behind the scenes: private student loans, which are built on giving students the worst possible deal.

There has been laser-like attention from Obama and Senator Elizabeth Warren to the callous federal student loan system, which controls about $1tn of student debt – and rightfully so, because it is immense and it is broken. Students are taking on too much debt to absorb rising tuition (a more complex issue itself) and the high debt is endangering the economy.

Yet private student loans – given out by banks and financial institutions to the students who can’t get a federal loan – don’t get as much attention as the federal system. Obama is exerting no public pressure on private lenders – “we have less leverage,” he said in a Tumblr forum on Tuesday afternoon – and neither is Congress, which is unlikely to pass Senator Warren’s student-loan reform bill.

It’s a bleak picture if nothing is done, and you can see the proof in the mirror world of private student loans – which, set loose from government subsidies or much regulation, is growing overrun with outrageous lending practices. The end beneficiary? Wall Street, of course, which has driven the growth of private student loans in order to cut them up into bundles, securitize them and sell them to other financial institutions.

The appetite for private student loans reached its height in 2008, when $20bn in new loans were created, according to the Consumer Financial Protection Bureau. As of 2012, there were $150bn in private student loans – or about 850,000 actual loans, although it’s hard to keep track.

That’s significant enough to demand attention for a problem that already highlights the worst of Wall Street, with lending terms that are unfair and designed to take advantage of borrower ignorance. This deep-seated unwillingness to let consumers revise the terms of the loan represents a double standard for companies compared to consumers.

Private loans for college are usually designed with the most punishing terms possible: while federal student loans hover at interest rates of less than 6%, it’s not unusual for private borrowers on private student loans to pay up to 18%, creating a downward spiral of ever-growing debt.

And the contract terms on private college loans are rigid to the point of cruelty. Borrowers have almost no say and little ability to renegotiate the terms if financial trouble occurs – an inevitability. Many private lenders don’t allow students to pay down the principal of a loan, which means endless payments just to cover the high interest, without ever chipping away at the real amount. Payment options like forbearance are temporary and restricted; prepayment or consolidation are largely forbidden. The most dangerous part for such a significant debt is that there is no escape, no way to ease the burden.

Students with private student loans are also inherently at a greater risk of manipulation. A plurality of students at for-profit colleges – nearly 42% – don’t qualify for federal loans and take out private ones. Freshman at for-profit colleges in 2003 could expect a 16% unemployment rate, just two years after graduation in 2009.

Another risky part: about 90% of the loans require a co-signer, like a parent, so if there is a default, it’s likely to take down an entire household. And there are defaults: depending on the type of lender, default rates can range from as low as 4% for reputable lender to a whopping 50% for the sketchier kinds.

Does this sound like a good system? It’s not.

“It is hard to avoid default and equally hard to escape it, as compared to options available to federal loan borrowers,” the Consumer Financial Protection Bureau said in its study of student loans in 2012.

Part of the complacency about private loans comes from demand that seems to be falling, which treasury secretary Jack Lew has noted with some relief in his speeches.

Still, it’s not falling enough. While giants like JP Morgan have abandoned the private student loan market, Sallie Mae has jumped in, and it is now making a decent profit from the business, which has become one of its financial bright spots.

But it’s not just size that requires greater oversight of the private student loan market: it’s style.

Only the most ignorant would claim that once a loan is signed, it is set in stone. It certainly doesn’t work that way on Wall Street. Companies flirt with default constantly; when they get close, they call the lenders back to the negotiating table and they work out more favorable terms: an extended payment period, or a lower interest rate.

Yet financial institutions never extend that same kind of consideration to consumers, who are seen as disposable clients. Foreclosure, default and bankruptcy are far more common results for consumers who borrow - the stories of consumers desperate to renegotiate a mortgage or student loan could fill volumes. Most of them fail. The relationship between financial institutions and consumers is not a reciprocal one: banks dictate the terms, and consumers accept them.

This asymmetry is most obvious in the world of private student loans, but it is also a virus of entitlement by banks that infects our entire culture of consumer credit. Someone should do something about it. Unfortunately, no one is.

