Sallie Mae Boat Loan

I am considering settling on a private boat loan that is through Sallie Mae. I am NOT in default, and have always made every payment, on time, since we got the loan in 2005, but we want to sell the boat now, and buyers are not offering anywhere near the price to pay off the loan ($18,000). Last year, when I was making a payment over the phone, an agent asked if I would be interested in settling on a full payoff of the loan at 20%. So, I just called about this again now, and found out I could settle for $15,300, but that it would 1.) go against my credit score and 2.) get a 1099 on the credit saying it was an earned income for my taxes. Should I settle since this loan has always brought negative attention in my debt to credit ratio, and since we don't want the boat or loan anymore? -- even though my credit score is around 760, which is great? What would it show on my credit report -- especially since I am not in default and my credit is good right now.