Your friend seems to be naive as well. The private loans through the school are a fixed 8.5% rate (compared to 8%, I believe, through federal). The federal does offer some Stafford loans, which we don't get (about 3% with a max of 8K... or so. i don't remember exact numbers). So there is a small benefit through federal.
There is a chance that RVU will get federal loans starting in the fall of 2012, but that hasn't been guaranteed.
I have heard something about that 20 years loan forgiveness thing through federal, but I don't know any details. I do know that we're on a 20 year repayment plan right now, so it's not going to matter in 20 years anyway.
When I was applying, I did consider tuition, but found that there was very little difference between DO programs... and that the interest rate wasn't a big enough deal to live somewhere I didn't enjoy.
For you, I definitely recommend going on to the federal financial aid website and reading up a little bit. I think you'll find it's not as bad as you think, even without the HPSP.