I would set aside some of the money as an emergency fund and use the rest to pay down the student loans. That's equivalent to a guaranteed 3.625% interest rate tax free.
Not if the OP has modified adjust gross income of less than 60,000-75,000 if single and 120,000 to 150,000 if married (those are 2011 numbers so slightly higher going forward. Then the interest is fully or partially tax deductible and you are back to 3.625% taxable equivalent. I don't like paying off student loans because they are very flexible due to the deferment provisions and of the two, would pay down the mortgage. You can't skip 36 months of mortgage payments if you lose your job.