[Broken Arrow]

Interesting!

While it may be a hypothetical question, it does strike close to home for me, since this is something that I am currently working on.

I think it's important to qualify that I believe the answer will vary from one person to another. We all have different levels of risk tolerance and probabilities of experiencing a potential disaster.

That said, I for one have chosen to pay down my student loans first, followed by topping off my emergency fund right after that (as shown in my signature).

Despite what's going on in my personal life, I am in good health and I am currently content with my relatively stable job. Therefore, I believe that I can "afford" to pay down my student loan first.

Also, please note that paying down a 5% loan is not the same as saving it in a 5% interest savings account, because the interest on latter is taxable. (5% of 20k comes out to a nice, round 1k. So, depending on your taxes, it could be a difference of $200-$300 each year.)

Now, if an 18% credit card was thrown into the mix, my answer would definitely shift to paying down the credit card (which is what I did, as noted in my signature). Not only would I save even more in the long run, but in an emergency, I can draw funds out of it again. Yeah, I know it's not a good thing to do, but in an emergency, you can at least take comfort knowing that you can do that if you had to.

Of course, as others have mentioned already, I realistically do a little bit of everything, changing what I focus my money on as I see fit. However, I do agree that having some kind of EF is very important to have, generally more so than paying down a low-interest student loan. Still, while I am open to suggestions to the contrary, I don't think that what I am currently doing is a bad idea (especially with a baby emergency fund in place).