The extra $83 works out to $2 per GB for the extra 40 GB; and you could purchase something like an 80 GB hard drive for that. Bomb it into an external case for about $15 and have twice the storage. However, performance will lag because most 2.5" casings are USB. It is nice to have some extra space - but I also like to have an external drive for those bulky files that I do not need all the time. I even put my old 10 GB to good use - it has copies of all of my software on it so I can maintain both of my machines, as well as four of my friends machines.
And I highly recommend that you do not write papers in Office - either get a decent word processor that is compatible with the various file formats, or learn to typeset in LaTeX. Just think, if Office barfs (as it is prone to do), then it will cost you marks. I'd consider Mariner Write, which is Word compatible without being bloatware... I have both Office and MW on my machine, and MW is about 40 MB total compared to 415 MB for Office... (I need Office to convert some files so that I can jamb them into a real spreadsheet program!)