First, congrats on a 50% savings rate on a $40K salary. You have clearly righted the spending ship.
Second, what do you think your income is going to be once you graduate with the MBA? And when you say loans in deferment, I assume there is no interest compounding while you are in school?
To me, some of the considerations are:
1. 401(k) and tIRA/Roth are use it or lose it annually -- if you don't max out in 2017, you can't make up the difference in future years.
2. At $40K now with an MBA pending, you are likely at the lowest tax rates you will ever be in, at least until retirement.
3. You owe significant $$ on loans, but [I assume] the interest begins to accumulate only when you have the [I assume significantly] higher salary to begin paying them back. IOW, you have a 0% loan for the time being, which will morph into a 6.8% loan after graduation. [If this is not true, and you are currently accumulating interest, it changes my advice]
4. Because you are just really starting on savings, you will probably have 10-20 years in the workforce. Ergo, the power of compounding, especially tax-free compounding, will benefit you more than someone who is say 5 years out from RE.
Given all of those things, for right now, I would recommend:
1. 401(k) up to the match (free money); and
2. Roth IRA (assuming your current tax rate is close to 0%). If there is still $ left to invest, then:
3. Go back to 401(k) with any extra.
After graduation, assuming you find a job that doubles your income or so, I would then recommend:
1. Continue to live on your current $1100/mo.
2. Max out 401(k)
3. Max out tIRA as long as it is deductible
4. Throw everything else you possibly can at the loans to get out from under them ASAP. Consider refinancing if you can get a significantly better interest rate.
5. After the loans are paid off, then you can consider saving for a house or other improvements in your standard of living.
If the salary increase isn't sufficient to save this much, then I think it's ok to drop the tIRA to pay off the loans, at least if you can't refinance -- 6.8% is pretty darn high in the current interest rate environment. But I wouldn't cut the 401(k) -- the money you invest now is going to have the best chance to compound the longest and make the biggest impact on your retirement 'stache in 15 years or so.
