Exactly yes. I feel morally obligated to pay back the debt since it was from a family friend. Had it been from a bank, I'd feel no remorse not paying them back.
and also, perhaps you should clarify the "deal" with the family friend. If the friend wanted to encourage your music career by helping your education, you can let the friend know how the courses (including jazz history) has helped set the stage for your music career and if you did not finish the degree, the loan was not wasted. If the friend thought there was real value in a degree, perhaps for a future academic career as well as a music education, you might consider having a talk with the friend before going further.
That is definitely something to consider. I did have a similar talk with this friend at the beginning of this school year about whether continuing was worth it. In giving me the loan she does believe that continuing is worth it. I do plan on talking to her again about the situation soon.