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&lt;p&gt;Here&amp;rsquo;s why it&amp;rsquo;s not a good idea to deliberately default on your loans to get a loan settlement. Megan McArdle points out a passage by FinAid&amp;rsquo;s publisher Mark Kantrowitz on what a loan settlement looks like:&lt;/p&gt;&lt;blockquote&gt;&lt;p&gt;Settlements do occur on student loans, but deliberately defaulting on your loans to try to obtain a settlement is not an effective strategy for saving money. Interest continues to accrue on a student loan after default. After a few years of nonpayment the accumulated interest is substantial. Only part of that interest will be reduced if you happen to obtain a settlement. In the meantime 25% of any voluntary or involuntary payments will be deducted for collection charges. Ultimately this means that you will be paying much more on the loan than if you hadn&#39;t defaulted and it will take you much longer to pay off the balance. The government has very strong powers to compel repayment. They can take up to 15% of your paycheck, offset your income tax refunds and even seize lottery winnings to repay the defaulted loan, all without getting a court order. Settlements are rare, mostly because very few defaulted borrowers can afford to make a lump sum payment of the amount owed, and usually involve either no less than a 10% discount on the total amount due (including interest) or the full principal plus half the interest. &amp;nbsp;See&amp;nbsp;http://www.finaid.org/loans/se...&amp;nbsp;for more details.&lt;/p&gt;&lt;/blockquote&gt;&lt;p&gt;[The Atlantic]&lt;/p&gt;

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