Hi everyone! I need some advice.

I'm currently in school and using student loans. The gov'ment is giving me more than I need, which I figured was fine: I could hold onto it, accrue interest, and then throw it all onto the loan when I graduate, instantly cutting it in half.

As I understand it, there's no real harm in keeping the money, other than the possibility of spending it before I have to pay back the loan. Payments won't be expected and interest on the loan won't accrue until graduation. (Right? It's actually two loans, one is subsidized and the other isn't.)

I've also been getting tuition reimbursement through work. Yay!

So at this point I've got maybe $15,000 of student debt which doesn't need to be paid back until I graduate (in 3 - 4 years still, debt will continue to grow.) I think the interest rate will be about 6% - 6.25%.

I also have a home equity loan with about $8,000 left on it. Interest rate: 5.25%

Between the extra money I got through the loans and the tuition reimbursement, I have about $10,000 sitting in a savings account.

I would have the full $15,000, but last year I tossed close to $5,000 of it onto the home equity loan, which at the time was closer to $14,000... which brings me to my question:

1) I can keep the cash, perhaps putting it into a CD or some other investment, and hold it until it comes time to start paying the student loan, and then just pay off almost the whole thing at once.

2) Or I can use the cash right now to pay off the home equity loan. That'll free up ~$200/month for me, plus I'll be saving on all the interest I *would* have been paying on the home equity loan for the next three years. If I'm really disciplined, I could even take the money I would have spent on the home equity loan and put it towards the student loan instead so that in four years I'll have built up 9-10k anyway, and saved on the home equity loan interest.

My intuition says that it would be best to put the money towards the student loan and then just keep paying down the home equity loan as quickly as possible.

My other intuition says that it would be really great to completely eliminate one of my debts and free up some cash each month so that I'm not living quite so paycheck-to-paycheck... with the trade-off being a larger student debt in a few years.

Am I making much sense? I'm afraid that what I SHOULD do is keep the money to pay off the student loan, but that what I WANT to do is get rid of the home equity loan. Short term reward vs. long term reward? I dunno. Or would it really be financially smart to eliminate debt now and start stocking away for the future debt?

Anyway, I'm grateful for any insight/options/criticisms anyone could offer. Thanks!