This is the case here. They’ve done this before, but with insured bonds. To make them more attractive, they wanted to pay out at a higher rate, but can’t get them insured at that rate. However, the utility is rated AA+ by the bonding companies.
I’d just echo putting at least some of the $ into an IRA. It is truly amazing the difference a very early start can make in the net results of a retirement plan.
One of the classic chestnuts in most financial planning books is the one about how if you put $2000/yr into an IRA from age 20 to age 25 and then stop, you wind up with more money than if you start at age 26 and continue until retirement.
As for paying off debt, simply compare the interest rate on paying off the debt to what you could earn risk free by getting a CD. Also factor in that paying off debt may be advantageous, but it’s inherantly not liquid. If going to grad school, you can probably defer payment on the loans, and then take 5-10 years to pay them off. While you may come ahead comparing the net cost/returns after 10 years, that’s not much help if you want to have a chunk of money available in 2 years for setting up a business or buying a house.
I recently had to a similar situation (though I am a bit older) and I considered paying off some additional principal on my mortgage (a guaranteed return of 4.875%). I decided against it because without refinancing my mortgage or taking a home equity loan, there was no way to get that cash back out again if I needed it for something else. Student loans don’t even give you the option of refinancing, AFAIK. Unless your student loans are north of 5 or 6%, I wouldn’t consider paying them off at the moment.