Every person considering student loans should make sure they understand what is in this post from Megan McArdle. Americans are spoiled, to some extent, by non-recourse home loans (ie, unlike in the rest of the world, they can't come after assets to pay the loan beyond the house itself) and pretty generous terms for escaping credit card debt. These cause us to forget that most other types of lenders out there are pretty hard-ass about actually, you know, getting paid back.
I never held any student debt, so I was not aware of many of the facts she provides, but my guess is that many people who do have student debts aren't that aware either. Here is the most important part:
I don't know why Mystal thought I was only talking about federally guaranteed loans, or that I didn't understand that his debt had been sold to a collector, but there you are. If I had thought that he was talking only about federally guaranteed loans, I would simply have said "Mystal is dangerously deluded and needs to issue a correction immediately before someone gets a very harmful idea from his post." Federal loans don't settle. Period....
Private lenders have more incentive to settle, but not a great deal more. Most unsecured debt, like credit card balances, personal loans, and medical bills, can and will be settled for pennies on the dollar--as low as ten cents in some cases (though this usually means that they don't have any verification of the debt, so I wouldn't take a settlement this low.) It's not unheard of for a credit card collector to take 25 cents on the dollar on a valid debt, and 50 cents on the dollar is eminently achievable for many people.
But my understanding is that student loans are the great exception to this rule. Why? Student loans are not bankruptable, not even private ones. A collector for normal sorts of unsecured debt is always working with the threat of bankruptcy in the background; if you try to hold out for full repayment, the debtor can always file Chapter 7. In most cases, that means that unsecured creditors get nothing.
But that's not the case with student loans. There are only two ways to erase the debt: prove you're permanently disabled and will never again earn more than a pittance; or die