Which student loans to pay off first: Stafford or private?
At the current rates, stated in the question, I would push additional funds towards your Stafford loans as their higher interest rates will incur interest charges almost 3 times faster than your private loans. With my loans I have not seen much information regarding private loans jumping the interest rate close to the 6.8% any time in the coming years (if others have insight to this I look forward to the comments).  Due to the private loans being variable there is an element of risk to their rates increasing. Another way to look at it may be to prorate your amount of extra payments according to their interest rate.  $1,000 x 0.068 /(0.068 + 0.025) = $731.18 Toward your Stafford Loans $1,000 x 0.025 /(0.068 + 0.025) = $268.82 Toward your Private Loans Without knowledge of the special provisions of your loan contract, the one with the highest interest rate should be paid first. Or, if one's fixed payment is much larger than the other, and it is a burden, then it should be paid first, but refinancing may be an option. Socially speaking and possibly even economically since it could affect your reputation, it is probably best to either refinance the cosigned loan or pay that off as rapidly as possible. Economically speaking, I would recommend no prepayment since the asset that is leveraged is your mind which will last many decades, probably exceeding the term of the loan, but some caveats must be handled first: Many would disagree, but I finance the way I play poker: tight-aggressive.
"My parents and I were suckered into buying this kind of thing when I was in high school. The sales people literally told us that it could be used to pay off student loans - they left out the ""in the event of your death"" part. We knew it was a life insurance policy, but were told that it would ""mature"" 6 months after graduation from college, and that it would then be disbursed to pay off loans, even if I didn't die. That seemed strange to us, so we explicitly asked several different ways whether it would pay off the loans after graduation, even if I lived, and they just straight up told us, ""Yes."" I'm guessing this ploy is still being used. Also, last I checked, student loans are non-transferable in the unfortunate event that your child dies - which means the loan is forgiven anyway - so this whole thing seems like garbage to me, at least in the student loan sense. I would steer clear from this stuff - it's pure snake oil in my experience." First priority is to set up an emergency fund of 6 months expenses. If you're going to be making ~30k a year, then that means you'll probably want to put away about 10k of it in a savings account or something else similarly liquid.  After that, paying off your student loans probably makes the most sense depending on the rate. My general rule of thumb (and I'm sure others will disagree with me) is to pay off debts that are >=6.0% first before investing. Paying off debt is a risk-free return on your money, which makes it pretty valuable. It'll let you direct more of your monthly income into retirement savings, too. After that, open up a Roth IRA.  You can put a maximum of $5500 in it for this year.  I like Betterment, but Wealthfront has a similar service. If the car loan has 0% interest for 5 years, then paying off the student loan is cheaper. No matter when you pay off the car, you will pay the exact same amount (as long as its within 5 years). You could spend $20,000 right now to pay off the car loan or slowly spend $20,000 over the next 5 years. The gross amount paid for the car loan does not change. On the contrary, the longer you wait to pay off the student loans, the more you will end up paying for them. So why not get the student loans out of the way before they rack up more interest and pay the car loan over time? Update: I forgot to add, as Ben Miller said, congratulations on paying off the $40,000! A friend tweeted a similar question regarding student loans, and I responded with Student Loans and Your First Mortgage.  The punchline is that you need to be aware of the 28/36 ratios in a bank qualifying you for your mortgage. Even though you have a house, you may not be aware of this.  Simply put, 28% of gross monthly income can be used to qualify for your house burden, loan, taxes, etc. 36% for total debt. So the student loan may fit in that 8% gap, and paying it all off reduces the cash you have without helping you borrow more money.  3-5 years is short term, and to that part of the question, this money should not be invested in anything at risk. A 3 year treasury or CD would be it, in my opinion. If I were you, I would pay off my student loans today or tomorrow.  Wouldn't it be nice to be completely debt free and not owe anyone anything?  It doesn't matter what the interest rate of the loan is; there is no need to spend anymore time trying to worry about whether or not the market will allow you to make a tiny bit extra over what you are spending in interest on the loan.  Just get rid of the debt, and you will get to keep every bit of the growth of your investments from here on out. After the student loans are paid off, that leaves you with $15k.  I would take $10k and put it in a savings account for an emergency fund, and put $5k as a start toward your retirement savings in a Roth IRA. At this point, with a fully funded emergency fund, a start on your retirement savings, and no debts, you have really set yourself up for success.  Learn how to budget your income so that you spend less than you make and can save up toward goals like a car (paid for in cash) and a down payment on a house. Its almost always better to pay off loans sooner rather than later.   Being debt free is amazingly liberating.   However, in your case, I'd be reluctant to make significant headway on a loan repayment program.  Here's why: The best investment you can make, right now, is in yourself.  Completing your education should be the top priority.  The next would be to meet the requirements of a job after received after school is complete.  So what I would do is estimate the amount of money it would take to complete school.  Add to that an estimate of an amount to move to a new city and setup a household.   That amount should be held in reserve.  Anything above that can used to pay down loans. Once you complete school and get settled into a job, you can then take that money and also throw it at your loans. You don't state your age, debt amount, loan rate, and amount of retirement savings. These facts impact the strategy you pursue: If your student loan interest is at low rate, it is more effective in the long run for you to prioritize 401k match contributions or Roth IRA contributions. Your student loan interest will be tax deductible. You may be able to file taxes separately as a married couple. This will keep your monthly loan payments lower than if you file jointly, allowing you to do tax-deferred savings (401k/Roth). I share the concerns about commingling your finances before marriage. You'll be married soon enough, and after that the $14k/yr gift tax concern won't even be an issue. "I think you're right that from a pure ""expected future value"" perspective, it makes sense to pay this loan off as quickly as possible (including not taking the next year's loan). The new student loans with the higher interest rates have changed the balance enough that it's no longer automatically better to keep it going as long as possible. The crucial point in your case, which isn't true for many people, is that you will likely have to pay it off eventually anyway and so in terms of net costs over your lifetime you will do best by paying it off quickly. A few points to set against that, that you might want to consider: Not paying it off is a good hedge against your career not going as well as you expect, e.g. if the economy does badly, you have health problems, you take a career break for any reason. If that happens, you would end up not being forced to pay it off, so will end up gaining from not having done so voluntarily. The money you save in that case could be more valuable to you that the money you would lose if your career does go well. Not paying it off will increase your net cash earlier in life when you are more likely to need it, e.g. for a house deposit. Having more free cash could increase your options, making it possible to buy a house earlier in life. Or it could mean you have a higher deposit when you do buy, reducing the interest rate on the entire mortgage balance. The savings from that could end up being more than the 6% interest on the loan even though when you look at the loan in isolation it seems like a very bad rate."