Awesome that you are interested in investing some of your savings, however, I seriously question the logic you are utilizing here.
A word of caution: the returns of the stock market over the past five years have been great but historically abnormal. The market is rebounding from its latest correction and recession in '08, making the returns seem unusually high. You can typically count on an average return of 6-7% per year over a very long time frame (10+ years). In other words, it is unlikely the market will continue to return 20% per year. Even your "conservative 10%" would be considered by many to be a very lucrative year. Conservative is more like 2-3%. You also should be ready to assume the risk that the returns could go in the exact opposite direction, such as in 2008, when the S&P 500 lost roughly 40% of its value.
All this to say: I would highly recommend you do not invest money that has been loaned to you! What would happen if the market underwent a major correction? You'd lose the money loaned to you and be in a major hole trying to pay that money back at interest. A correction is not unlikely with the way the market has been growing over the past few years.
Don't forget stocks are highly volatile and risky ways to invest money. You should really only be investing in a stock index fund if you can keep that money in the market for at least 10 years. That allows you to ride the ups and downs of the market. But for short-term use, it's a bad idea! Especially with money coming from a loan!!
I think the smartest move would be to put that loan in an online savings account. Some of the best ones (Ally, Barclays) can give you a yield of .75-.9% per year.