Alice Cortes, 57, would be able to end her $25,000 student loan nightmare if only she could answer one question:
Who is Jorge Torres?
According to private student lender Sallie Mae, Torres was listed as a co-signer on the $13,000 Parents PLUS loan they issued to Cortes on behalf of her son, Brandon, in 2002. At the time, Brandon had enrolled to study IT network administration at the for-profit technology school Chubbs Institute in New York.
But as far as Cortes knows, Jorge Torres doesn't exist. To top it off, she had no idea a student loan was issued under her name at all.
The Confusion Begins
"When applying for financial aid (my son and I) were told that before he could be considered for any other aid, I had to apply for a parents loan," says Cortes, who was accepting welfare assistance at the time. "When I filled the application, I told the financial aid office there's no way they're going to approve this. How can you make a loan for that amount of money to somebody who's making $13,000 a year?"
Time passed, and when she never heard back from Sallie Mae, she assumed her hunch was right –– she wasn't a viable loan candidate.
Her son completed his nine-month program with no questions asked, and they figured federal student aid had been enough to cover the bill.
Then in late 2004 Sallie Mae came calling, with their lawyer in tow. The lender claimed they issued her a $13,000 loan and sued her for defaulted payments. According to the loan application included in their complaint, Cortes had applied for the loan with a co-signer by the name of Jorge Torres.
"I never lived with any male by the name of Jorge Torres," says Cortes, who by that time had moved to Florida after being laid off from her job in New York. Someone by his name had signed the promissory note, however, and listed her income as $20,000 per year, about double her actual earnings.
But that wasn't enough to convince Sallie Mae. A Florida court upheld a ruling in New York in the lender's favor in 2010. Cortes was on the hook after all.
"In December, they filed for a ($360/bi-weekly wage) garnishment with no notice to me whatsoever," she says. "I asked their attorney for a copy of the promissory note (for the original loan) they claim I signed ... While the signature is close, it does not appear to be mine."
We reached out to a Sallie Mae spokesperson, who declined to comment on the alleged forgery but offered this statement:
"We thoroughly investigated and found no evidence to support the claims. In fact, a court evaluated the case and found that wage garnishment was appropriate."
Unable to afford an attorney to defend herself, Cortes is running out of options.
"Their actions forced me to move in with my son and have resulted in even more serious damage to my credit," she says. "Now to add insult to injury, Sallie Mae has turned this over to (debt collections agency) Allied Interstate for additional collections in spite of the fact that they are garnishing me."
A Familiar Story
Private lenders stand to make a lot of money by selling defaulted loans like Cortes' to collectors, a practice that netted the industry $20 billion in 2008 –– four times the $5 billion it made in 2001, according to the Consumer Financial Protection Bureau. And since private lenders can jack up interest rates by as much as 25 percent, defaulted borrowers are all the more lucrative for business.
So far, Alice's total wage garnishments have exceeded the $13,000 original loan balance. She has $12,000 left to go––plus whatever interest accrues in the meantime.
Experiences like hers are why the CFPB has planned to more stringently police the private and for-profit college sector, which has been accused of the same risky lending practices as big banks leading up to the housing crisis.
Chubbs Institute, which was bought by private-equity fund Great Hill Partners in 2004, was sued by former students the same year on grounds the "school promised more than they could deliver," according to the Washington Post.
Cortes might agree.
"I can't afford what they're doing to me. I don't want to live with my son," she says. "He needs a life that's separate and apart and they've made it damn near impossible for that to happen at this point."
More from Business Insider
The 12 Dumbest Insurance Scams of the Past Decade
17 Surprising Uses of Lemons
11 Personal Finance Equations You Need to Know