Your loan servicer won’t offer you a discount if you offer to pay your student loans in a lump sum — no matter how old your loans are, how much you owe, or what your original loan balance was.
When your loan is in good standing, the lender has no incentive to accept less than the full amount owed. The longer you take to pay back the loan, the more interest accrues, and the greater the return on the investment.
The only time you can save money by paying federal or private student loan debt in full is if you miss enough monthly payments and your loans default. Here’s what happens when you default on a student loan.
After you default, you can approach the collection agency and offer a settlement for anywhere from 10 to 70% of the current loan amount. Read more about how to settle student loan debt.
If you’re successful in negotiating a payoff, keep in mind that you’ll have to pay taxes on the canceled amount. You may end up with a large bill owed to the IRS, depending on your student loan balance.
Learn More: Tax Implications of Settling Student Loan Debt