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Fisherswamp ,

Don’t forget, you have to pay taxes on all income, including interest. So your 5% APY is not 5% cash in hand. I would recommend that you pay off the loans

Copernican OP ,

Thanks. I didn’t even consider tax implications.

sevan ,

I agree with this recommendation. After taxes, paying off the loan is probably slightly more profitable and improves your monthly cash flow.

sugar_in_your_tea , (edited )

In the future, your can compare options with Fidelity’s Tax Equivalent bond calculator. For reference:

  • Certificate of Deposit - bank CDs and savings accounts, federally and state taxable
  • Treasury - federally taxable, state tax free
  • in-state municipal - federal and state tax free

The number is the return you’d need for each type of bond to be equivalent after taxes. Your loan is a tax free return, so consider it as a Treasury bond.

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