What if he is investing via his IRA in Lending Club?

Sorry to revive an old thread, but google searching did not yield any more current discussion of the topic than this.

If an IRA is involved, there is actually the potential for this to make sense.

Let's say the student loan rate is 7.24%, the same rate available from lending club, and the student loan interest is not deductible due to income limits.

Let's also say that that only cash available is in the IRA.

Let's say a $4200 LC loan is taken to pay a $4094 student loan balance, and the loan is successfully purchased through the IRA.

Over 36 mo, the original student loan would have been $126.86 / mo, for $4567 total to pay off.

The lending club invester pays 4200.

The lending club borrower pays the monthly payment is $130.15 / mo, for $4685 total.

The lending club investor receives 99% of the borrower's payment, or $128.85 / mo = 4639. (4639 - 4200) is a net of $439 gain

Also note that after the 4% origination fee is subtracted ($168), the borrower still had to pay $62 to fully pay off the student loan.

Lending club route: -4685 + 439 - 62 = 4308 total cost to pay off the loan.

Total amount saved by going the lending club route is (4567 - 4308) = $259

Whether or not it is possible to present the loan in such a way that no one else would want to buy it, I don't know, but it looks like there is justification here to pursue it under a narrow set of assumptions.

What could the IRA money have yielded risk-free? A 1.6% CD for $4200 would pay $205 over three years.