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First off, a big thanks to anyone willing to help! I am new here and already have learned so much.

Ok, my primary question is where to place an upcoming debt payoff, which at first glance will look obvious, but there are some unique factors. Hope it's not too long.

In November of this year (2007), I will get a lump sum of $35,000 for loan/debt repayment, tax free, in exchange for my service. It is meant for student loans, but it can go to other debt (I made sure this would be ok with the program). BUT I cannot get more repayment in the future if I don't put 100% towards student loans this year.
Credit card balances should be $18,000, down from the current $25,000. I am paying an extra $800-1000 a month, which should continue until November. Student loans: $43,000 at 1.875% fixed. No other unsecured debt.

Financial scenario #1 in November:
Pay off all but $8,000 of student loans with none going to credit card. Left with $8,000 at 1.875% and $18,000 at at least 16% (right now I'm maxed and can't transfer balances. May be able to transfer as I snowball card balances.) I can continue to put around $1000/month towards paying off for the next year (through November 2008).

Scenarion #2
Pay off all of credit cards, pay off $17,000 of student loans. Left with no credit card debt, and $26,000 at 1.875%. Still have an extra $1000 a month through the next year to put towards student loans or saving.

Either way, I'm stuck with $26,000 in debt to carry for at least 3-4 years, as I know I won't be eligible to reapply for any additional debt repayment for 3-4 years. I know I can pay off another $9-10,000 over the next year, but after that we won't be able to contribute as much, secondary to anticipated income/work changes of my husband's.

Is being able to get an additional $8,000 in free money in 3-4 years (which is not guaranteed, even if I reapply) worth the extra time and accumulating interest on the credit card balances? Am I throwing future free money away for the satisfaction of paying off the credit cards, or is student loan debt at 1.875% that much better of a kind of debt to carry? We hope to build a home in the next 1-2 years. Will lenders care which kind of debt, or is it all equal, since both will be around the same amount?
I know this was probably too long-winded, and thanks to anybody who got through it. Any advice is greatly appreciated.

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