It's very unlikely that you will ever get your interest rates below 5% -- probably impossible. Your Stafford loans are set by Congress at 6.8%. The Grad Plus loans are set at 8.5%. I just don't see how you will ever get that under 5%. Plus, the tax advantage really aren't that great. You are capped at interest payments of $2,500 a year and the deduction is phased out once your income reaches certain thresholds -- and the thresholds are not that high, especially for married couples.
BTW, have you run all of the figures on how much more you are paying in the long-run using a 30 yr repayment plan? It's stunning how much more in interest you will pay. Just some food for thought....
My ug debt has a rate below 5%, so depending on how the number crunch out, I'll probably keep those separate from the ls loans. If you can invest your money and have returns over 8%, trying to repay loans at below 5% interest makes no sense because you're making gains on that loaned money. Rather than paying it back, you're earning a 3% net gain (if 8% returns and 5% loan rate). Additionally, earning 8% returns on long-term investing is modest, so holding out on repaying low-interest loans just doesn't make sense. The Grad Plus loans I'll definately pay back as quick as possible (so long as I don't get an excellent consolidation rate, which I doubt I will).
I agree with you about the modest tax deductions. However, the phase-outs are adjusted for inflation and based on AGI, so depending on your above-the-line deductions the amounts aren't too bad. I know a few years ago that the deductions completely phase out at a $160k AGI for married joint filers. With a spouse starting grad school when I finish, this will allow me to make some deduction. Regardless, my main focus was on the ability to make gains on the borrowed money rather than paying it back as quickly as possible. Even if you make $160k+, investing the money rather than repaying it is the wiser financial move.