I have a student loan for about 8500 from 2000 that is in default. I am currently seeking the best way to pay this off. I have the money to pay it in full but they offered me a settlement of about 7000. Should I pay this loan in full or settle? How will a settlement affect my credit as opposed to paying in full?

Is it very late in payments, have they already been posting it as a late pay on the credit.
In the agreement to pay, what has been said about how it will be reported. And if you are going to settle, have you considered making a counter offer for perhaps 6000.

Yes the Payments are late. The loan has been in default for about 4 years or so with a lot of missed payments. I didn't make an agreement with them yet, I'm wondering if I would be better off paying the loan off totally or settling. I'm trying to build my credit up.

Paying in full will look better on your credit report, but frankly, credit issuers don't really look at the reports, just your score. And I don't think paying in full will have a significant affect on your score over a settlement.