I'm laughing. This is not a bug, this is a feature.
Actually I recall a bloke called Ken who did this when I was in TAFE with him, poor mongrel wiped his machine three times before I let him in on the secret.
The Password: field works fine, but it doesn't report any stars back because that gives someone the chance to count the length of your password. Try just typing it in and pressing enter.
It will be less hilarious if I am wrong though :/
Still, while you're training, go find a quick basic-usage guide for ubuntu, I'm certain they cover this in their basics process.