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Originally Posted by The Budget Man
The emergency fund would be nice BUT when the emergency came you would still be paying off the debt.
When an emergency does come you need the smallest debt possible so that you can survive the cash crisis.
Many a person has lost their job and then been in critical problems because of the debt repayments.
Now since there aren't many emergencies that require $20K. I'd get the debt down and then get stuck into savings.
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Sorry, I had to post again to point out that I think this is really the wrong way to look at things. Let's say hypothetically that you have $1000 in living expenses every month and on top of that you pay $200 for your student loans. So you take your $20k and pay off the loan; now you just have $1000 in expenses every month.
Later that day your boss says, "you're fired." How exactly are you going to pay your living expenses? That extra $200 a month that you aren't paying makes very little difference, while not having the $20k makes a gigantic difference. Obviously there are in-between scenarios that are more optimal, but given the choices I don't think it's close.
Not having an emergency fund places you in serious financial risk, while paying off a fixed, low-interest loan does very little to reduce your exposure to risk.