100% pay it off. Not only are you eliminating all interest, but an unpaid loan sits as a liability on your credit ledger which affects future borrowing.

The absolutely optimal move is probably to keep 5 or so k of debt around just to hedge the forgiveness play. But just paying it all off is also a great investment. You’re not likely to find another way of using your money with a >4% ROI. If the hassle of keeping another set of bills current is going to significantly add stress to your life I would pay it off. Really, though, there’s no way to lose here.

I think you’re okay either way but personally if I have an emergency fund and no higher interest debt, I’m paying that off for sure. Even if I lost a couple bucks, worth it for peace of mind.

Would be different if the debt was a mortgage at 3%, which many people do have right now.

Edit: One note for folks doing similar math, don’t forget interest and yield on bonds are taxed as ordinary income (20~30% in the US).

I think at that rate there isn’t a bad decision. Pay it off for the peace of mind. Or, if you have a higher risk tolerance, invest it in the market, since long term it would likely return more than 4.5% (historically speaking, of course). I think keeping the money to keep it in a money market account or CD is probably not worth it, though.

I don’t think there’s a bad decision.

A CD isn’t the only option. A 2-year treasury note pays 4.82% right now. You could do that and then reevaluate in 2 years. Having more accessible/liquid assets leads to more flexibility if you need money for an emergency or even a move or downpayment or whatever.

There’s also the very remote possibility for loan forgiveness.

I don’t think the interest spread is large enough for that to be the “slam dunk” answer though. If you’re not great with money or just don’t want to deal with another administrative burden I’d lean towards just being done with the loans.

The government is never going to take responsibility for pushing predatory loans onto young kids. The last hope was the Biden forgiveness plan.

Pay it off.

With a 0.03% difference, it doesn’t make a lot of difference. That being said, it depends on your financial situation. Some things to consider:

• Repaying the loan early or investing the money into cds such that the cash flow from the cds matches the cash flow to the loan repayment is almost equivalent. In the corporate world, this would probably even qualify for accounting defeasance, which would allow you to keep the debt but removing it from your balance sheet. This is just an illustration of how accounting wise, both situations are pretty equivalent
• keeping the loan outstanding and the cash invested vs repaying early gives you option. If you do the former, you always have the options to do the latter later. Whereas if you repay the loan early, it is a definitive action. So there is an advantage to not repay early. You can always wait and see. If you invested in bonds instead of CDs, you could even potentially benefit from movements in interest rates.
• your return on investments might be 5% at your current level of assets, but your marginal return might be different. As an example, someone with only 10k to invest might not be able to bear much risk and only be limited to bonds. 100k and it opens the door to a diversified portfolio of stocks and bonds. At 1M they are qualified investors and have access to more options. So even though your whole portfolio might give 5% return now, every dollar you add on top opens the door for potentially more returns. If you use money to repay loans, you are shaving off the dollars that would have brought you the highest expected marginal return.