Thought I'd post this question to get some other perspectives on paying off around $10,000 in Stafford loans that my daughter currently has (She is still attending school for another 2.5 years). Loan interest is not deferred, and accrues interest at 6.8%, which she's been paying while in school to avoid the interest compounding further until after graduation (she had the option of letting it accrue until then without payment).
My daughter's University has a strong coop program which she is enrolled in (as a Nursing student). She just completed 6 months of Coop work (she has 2 other 6 month work periods before graduation to earn approximately 15-20K), and has earned enough to pay off the student debt if she chooses to, with about $8,000 to spare (which is plenty for my daughters emergency fund). We've set aside enough funds (from parents) to just about fully fund the remaining college expenses, so this cash shouldn't be needed for future college expenses (for undergrad anyways).
My questions/options are:
1) Should my daughter pay off the student debt now, vs. waiting until it comes due at graduation in 2.5 years? Its seems that she would basically be getting a 6.8% return on her savings if she did so. Only consideration here is that once she pays off the debt, this cash would not be available to use towards graduate school education (she's not planning to go to grad school as of now) if she went.
2) As an alternative to fully paying off the student loans, would my daughter be better off only paying 1/2 the debt, and hold the remaining cash in short term CD's until graduation and she determined with certainty that she wasn't attending grad school.
3) Don't pay off any debt for now, and keep the cash in short term CDs until graduation in 2 1/2 years.
Only other background is that she has an additional $17,000 in Roth IRA's/mutual funds in addition to $19,000 in cash that she has on hand.
Thanks in advance for your thoughts on this matter.