I was recently told by a financial adviser that I could settle my student loan debt for a fraction of what I owe, if I had a large enough lump sum of cash.  Is this an accurate statement?  The adviser did not give a set percentage amount of loan debt required to satisfy, but said to start the negotiations around 1/2 of my total debt.  For easy math lets assume my total debt for undergrad and law school is $150,000 all through federal loan programs of one type or another.  Do you believe it would be possible to settle that debt for $75k?  If so, how would one go about the process of accomplishing this task?  Further, would it matter if it was 2 months after graduation versus 2 years, 10 years, etc.?  Would there be tax implications?

Thank you for your time.

Typically any discussions about settlement are only entertained once loans are in collection, meaning you are late on payments and facing ballooning fees—not where you want to be.  Check out all there is to know on compromise and settlement of federal student loan debt here: http://www.studentloanborrowerassistance.org/default-and-delinquency/compromise-settlement/

Sometimes borrowers can settle with private student loan companies, but those lenders are not known for accepting particularly borrower friendly deals.

I’m not sure about the tax implications but the credit implications would not be good.

I’d be glad to listen to your financial adviser.  Maybe I’m missing something?