Even if you can get 5% on a muni bond with limited risk (meaning a decent rating), why would you prefer that over a guaranteed 7.9% return by paying off the Gradplus loans early? 5% return and some risk is not as good as 7.9% return and no risk (or if there is some risk it would only be in paying off your loans before the OWS people get debt amnesty for everyone--but this will not happen). The same goes for Stafford loans, although the difference is lower at 6.8% interest.
A Roth IRA is probably the best investment vehicle possible for someone early in his/her career because all of the gain on the investment will be tax free. If you are investing for 40 years before you retire, this can be a huge amount of untaxed gain. Unless your employer has matching 401k contributions, a Roth IRA is better by far than a 401k and traditional IRA (where earnings are untaxed going in but all investment profits are taxed when you cash them out in retirement). If you are close the retirement, then a 401k may be better.
The money need not be isolated, as some have suggested. Plow 5k into the Roth in the stub year, then invest in a traditional IRA/401k and quickly convert it into a Roth. This allows you to get around the income limits. http://retireplan.about.com/od/iras/a/convert.htm
I believe it is a good idea to pay off the student loans as fast as possible while still saving for an emergency fund (6-9 months' expenses), maxing the Roth IRA (only 5k/year) and possibly maxing out 401k contributions (I think that is around 15.5k/year). If you do not make these contributions to retirement accounts each year, you lose the opportunity. If you have the chance to pick up a cheap house somewhere, this may be a really good deal that you should go for, but I do not know enough about real estate to feel comfortable commenting on it.