Lenders also can't deplete money held in qualified retirement plans, including 401(k)s and IRAs, says Elliott H. Stone, managing attorney of the California Consumer Law Center and author of "Student Loan Secrets 'They' Don't Want You to Know About."
"If you have qualified plans, do not put them into the negotiation," Stone says, adding that if a loan servicer or collection agency is pressuring you to raid your retirement account, it's time to seek legal help.
Do: Request a paid-in-full statement
Don't: Make the first offer
In order to get the best settlement deal, Kantrowitz says to let the lender take the lead.
"Say that you'd like to discuss a settlement and (ask) what amount they would be willing to accept as payment in full of your debt," he says. "Try to get them to make the first offer. Don't you come in and say, 'I'd like a settlement for this amount. ...'"
If settlement is possible, Kantrowitz recommends having an attorney review the terms of the offer and request documentation that shows that all of your student loans have been paid and settled.
"You need a written agreement that states that the fulfillment of the agreement will cause the loan to be paid in full, sets the terms of it and make sure that you are going to get a paid-in-full statement once you make the payments according to the agreement," he says. "I've seen too many times where the borrower says 'I settled my loans,' but they reappeared."