Maximizing interests

Reading Houseonimics by Smith and Smith hasn’t been the most exciting read. (My favorite antidote so far: the photos of the houses rented vrs. bought on pages 21 and 22.) Nevertheless, it does have great information about the home buying process. While we’re in no position to buy now, we hope to be in the next few years.

However, it was a point about leverage and investing that caught my attention:
“You will make money borrowing at 6 percent and investing at 10 percent; you will lose money borrowing at 6 percent to invest at 2 percent” p.84

An obvious statement, but it got me thinking about my stimulus check.
(Yes, I know, it was an odd jump, but that is how my mind works sometimes…)

I’ve got a later SSN, so I’ll be one of the last people to get my stimulus check. (Haven’t got yours either? Go to the federal website to see when you will). While I would l-o-v-e to already have it, the time lag has allowed me to think about how to best use it.

For me, I don’t need to spend it. I know that is what the government wants you to do with it, but that’s not in my best interest. I want do as Smith² suggest and maximize this “free” money that is coming my way.

Here are my options as I see them:
A) Beef up my emergency savings (earning 3% and I’ve got 2.5 months worth and I’m going for 6 months)
B) Contribute to my ROTH IRA (given the crazy stock market swings I’ve only earned 1% this year and I’ve got $1600 of a possible $5000 saved for 2008)
C) Pay down my college loan (@ 7% I’d be “earning” more than any of my savings and investments in the short term)
D) Divide my $600 among all the accounts

Choice C seems the most beneficial in the short term. However, what would that $600 be in 40 years if I put it in my ROTH? Given that my ROTH returns are uncertain year to year (but hopefully the markets will continue to trend upwards) and my loan is a set percentage, would it still be advantageous in the long run to pay down the debt?

Any opinions or ideas?