What Should We Do? Invest or Pay Down Debt?

[Sliq]

Hello All!

Long time reader, first time poster here. My wife and I have been taking a more in-depth look at our finances lately since we are planning to start a family within the next 2 years. I'd like some advice on what you all would do in regards to our financial situation - specifically, should we put more towards investments or pay down debt?

The FACTS:

Pre-tax income: $150,000

Cash: $5,000
Credit Card Debt: $0
401(k), Roth IRAs, and HSAs: $108,000

Home Value (per Zillow): $243,000
Mortgage: $177,000

Car 1: $14,000 (value) and $15,800 - 0.9% (loan)
Car 2: $8,500 (value) and $2,000 - 0% (loan)
Motorcycle: $1,500 (value) and $0 - (loan)

Student Loan #1: $80,000 - 5.65%
Student Loan #2: $21,500 - 6.63%
Student Loan #3: $8,800 - 4.05%
Student Loan #4: $16,000 - 2.77%
Loan from Parents (house down payment): $10,800 - interest free

Summary:

Total Assets: $380,000
Total Liabilities: ($331,900)
Difference: +48,100

Should we continue maxing out our 401(k)-($35,000 per year) and Roth IRA-($11,000 per year) through vanguard and other low cost index funds, and then focus on the debt (whatever is left each month)? Or focus on the debt and pay down more of the debt first?

One other factor to consider - my wife is thinking about going back to school (part-time) and obtaining her Masters, which would cost us $30,000 total (which we would need to take an additional loan out). Upon completion of her Masters, it would effectively increase her income from $75,000 to $100,000+. Assuming she can continue to work full-time while taking classes online over the next 2.5 years - I believe it is smart for her to do so, if we are very confident her earning's potential will increase as well.

Any thoughts, concerns, or ideas would be much appreciated. Would love to hear from you all. Thanks!

[Joel]

I would pay off the two higher interest rate student loans ASAP, as well as the family loan.

What interest rate will you be borrowing money for her to attend grad school? If it's higher than your highest interest rate it would be best to save up and pay for school with cash.

[RichMoose]

Considering your high income, I would definitely continue maxing out your 401k. It would probably be worthwhile to drop your Roth IRA for a short time to get rid of the two student loans that are over 5%, starting with the highest.

About the grad school, as a couple your incomes are quite high. Your wife is already making $75,000/y. It's probably not worth accumulating more debt at this point for just a moderately higher after-tax salary. Is she truly maxed out salary-wise with her current education? This depends on where you live and what field she works in I guess.

[boarder42]

Any loans over 5% pay down everything else pay the minimum.

[plank]

What is your monthly take-home pay and monthly expenses? 

Could you continue to fully fund the retirement accounts and pay for grad school as you go? 

I would do grad school since it would pay for itself in about 2 years if your assumptions are correct.  I would look into getting loans for it, but would only do it if the loan amount offered was less than 5.65%, otherwise I would pay cash.

What are your wife's career goals?  If she is planning to graduate from grad school around the time you have kids, is she going to continue working?  If not, it definitely doesn't make sense to go back to school.