If grad school won't load you up too bad with loans, it might still be worth tossing it into a rothIRA and carrying the loans. With pretty low rates right now, student loans are pretty cheap money and will be beat out by market returns (especially since you are avoiding capital gains tax in the roth). Having a leg up on retirement might make it easier to make other decisions. A reminder (which I didn't make clear originally)--Roths have contribution limits. No matter what you plan to do with the rest of the money, you should be hitting your 5K limit this year (technically if you can open it in the next 2 days, you can still make a $5k 2009 contribution bringing you up to $10k). That leaves you 15k ..definately take some for yourself now...make a big toy purchase that you can get a few years out of like a new computer or a PS3 or a nice bicycle. You don't want to blow too much of it (and don't do it until you have a plan for the rest of it) but you should get something before you lock it away. After that, aim to hit your roth ira limit again next year (if you want to force yourself to do that...you could get a 9-month CD to lock up the contribution limit until 2011). now we are down to what...8k? This could be your future down payment or the repayment of principal on any higher interest loans...until then you are probably looking at some sort of brokerage account and some funds (similar to what would be in your Roth). I would recommend Thinkorswim for both Roth IRAs and regular trading...you probably won't use most of their advanced features (I certainly don't) but they are good people. EDIT: it is of note that (while against conventional wisdom), Principal withdrawals from a Roth IRA are tax and penalty free for any funds that were deposited >5 years ago. Raiding your retirement account isn't good advice, but if you specifically plan for it, it can make sense (e.g. you would like to use a sum of money in several years as a down payment but you would also like to start an IRA...you can start it with the sum of money, withdraw it 5 years later, and keep the IRA going off of the interest and later contributions) With Federal Stafford Loans charging 6.8% interest, that is not exactly cheap money in this economy. Many people would be THRILLED to get a 6.8% annual return these days. You should seriously consider whether going to graduate school makes financial sense. Tuition is NOT cheap like it was up until the 1980s. The additional earning power of a graduate degree is marginal when you factor in the exorbitant price of a graduate education that you could be paying off for 30 years.