While it might be true that excess tax was withheld from your severance, meaning that you can get a refund, it is also true that next year's tax rates will be about three percent lower for most taxpayers. You will ultimately pay less tax if the loan is deemed a 2018 distribution instead of a 2017 distribution. (If you already made your December payment, it may be too late to have it treated as a 2017 distribution anyway.)
Don't forget you will still owe a 10% early withdrawal penalty unless you are over age 55, so it may still be beneficial in the long run to pay off the loan and leave the money to grow to your retirement.
