Student loan collection agency National Recoveries Inc. (NRI) fired 248 Minnesotans last week, citing an executive order that defers all federal student loan payments, interest and penalties in the wake of the coronavirus outbreak .
In a âWARN noticeâ letter sent to the state on March 25, National Recoveries said the permanent layoffs were effective on March 22. Affected workers are located at NRI offices in Ham Lake, Brooklyn Center and Arden Hills.
Several state, business and college officials are now wondering if other debt collection agencies or bank collection departments could potentially follow with layoffs as they halt federal student loan collections.
The Minnesota Department of Employment and Economic Development (DEED) said Monday it had dispatched its state rapid response team to assess the needs of laid-off NRI workers and would assist them in their job search .
In its letter to DEED commissioner Steve Grove, NRI said its actions were not on its own initiative.
The US Department of Education recently gave the NRI a COVID-19 “direction” that cited President Donald Trump’s “decision to stop collecting student loans and waive certain interest and penalties on student loans for several months, âthe letter says.
The department also informed NRI that it was “no longer authorized” to make outgoing phone calls or send collection notices. In addition, the department has ceased all payday garnishments and treasury compensations associated with student loan payments.
In its opinion, NRI said, “NRI’s work requires a government contract, and some of its employees must be given security clearances,” so some changes could not be helped.
It’s unclear how many student lenders, bankers, or collection agencies in Minnesota are in the same situation as NRI. State officials noted that Trump’s stay order only applies to federal loans.
Many private lenders have already responded to the massive unemployment crisis triggered by the coronavirus with loan deferrals of 90 days or more, said Andrew Wold, attorney for the Minnesota Office of Higher Education – which issued 7,662 low student loans. interest rate worth $ 65.8 million last year. .
The NRI layoff situation “may be the unintended and unintended consequence” of the COVID-19 disaster assistance program, Wold said.
âIt’s both sides of the coin,â Wold said. âYou help students by preventing these collection companies from suing them by suspending their loan repayments.
âBut at the same time, you have collection businesses that are operating on an emergency basis. If they can’t collect their loans, they can’t pay their workers.
Others have accepted. “There are always downstream effects of all decisions and that is why those choices are difficult for decision makers right now,” Scott Buchanan, who heads the Student Loan Servicing Alliance in Washington, DC
NRI positions eliminated include Compliance, Garnishment Operations, and Administrative Directors and Assistants, as well as a Shuttle Driver, Leadership Developer, and various training, outreach and analyst positions.
The 248 workers affected join the ranks of 239,2632 Minnesotans who have applied for unemployment benefits since March 16, state officials said. NRI appears to be the first Minnesota debt collection agency to suffer major layoffs due to a coronavirus relief program.