In theory, you can’t fund a contribution with loan proceeds. And in reality, it’s hard to prove just where the contribution money came from, exactly. But also in reality, the IRS and/or the Department of Education can demand an audit of either your taxes (since you’re claiming a deduction) or your financial aid application (because you’ve received aid through a government-administered program). Either organization can make the determination that you did, indeed, use loan funds to fund your contributions and disallow the deductions OR disallow you from participating in federal aid programs.
However, if you make those contributions today, before you receive loan proceeds, you’re not borrowing money to make those contributions, now, are you?
If you’re going to borrow money AND make these contributions, then make sure you have a damn good paper trail to prove you didn’t use the loans to do it. Use separate bank accounts, or whatever you need to do. That’s all I’m saying.
You can pretty much do as you wish with student loans, so it seems a simple matter of whether the return on the investment will beat the cost of the loan. Probably less than what a margin account would cost, and no chance of a margin call (although you have to acknowledge the risk that the investment could tank and you’d be holding the bag full of debt). I don’t really see anything wrong with it, unless you’re the kind of person who feels bad about stuffling your retirement account with educational funds that could have realized the dream of some poor inner-city kid who had no other hope of college.