Student-loan collection agency National Recoveries Inc. (NRI) laid off 248 Minnesotans last week, citing an executive order that postpones all federal student-loan payments, interest and penalties in the wake of the coronavirus outbreak.

In a “WARN notice” letter sent to the state on March 25, National Recoveries said the permanent layoffs were effective March 22. Affected workers are in NRI’s Ham Lake, Brooklyn Center and Arden Hills offices.

Several state, economic and college officials now wonder if other debt-collection agencies or bank-collection departments could potentially follow with layoffs as they halt collection of federal student loans.

The Minnesota Department of Employment and Economic Development (DEED) said Monday that it has dispatched its State Rapid Response Team to assess the needs of the laid off NRI workers and will assist in their job hunt.

In its letter to DEED Commissioner Steve Grove, NRI said that its actions were not of its own making.

The U.S. Department of Education recently gave NRI a “guidance” related to COVID-19 that cited President Donald Trump’s “decision to cease collection of student loans and to waive certain student loan interest and penalties for several months,” the letter said.

The department also informed NRI that it was “no longer allowed” to make outbound phone calls or send collection notices. In addition, the department ceased all wage garnishments and Treasury offsets associated with student-loan payments.

In its notice NRI said, “NRI’s work requires a governmental contract, and certain of NRI’s employees must receive security clearances,” so some changes could not be helped.

It is not clear just how many student-loan lenders, bankers or collection agencies in Minnesota are in the same position as NRI. State officials noted that Trump’s deferment order only applies to federal loans.

Many private lenders have already responded to the massive unemployment crisis unleashed by the coronavirus with loan deferments of 90 days or longer, said Andrew Wold, attorney for the Minnesota Office of Higher Education — which issued 7,662 low-interest student loans worth $65.8 million last year.

NRI’s layoff situation “maybe the unforeseen and unintended” consequence of the COVID-19 disaster-aid package, Wold said.

“It’s two sides to the coin,” Wold said. “You are helping students by not having these debt-collection companies go after them by putting a hold on the loan payments they are making.

“But at the same time, you have collection businesses that work on a contingency basis. If they can’t collect on their loans, they can’t pay their workers.”

Others agreed. “There are always downstream effects to any decisions and that’s why these choices are tough in this moment for policymakers,” Scott Buchanan, who runs the Student Loan Servicing Alliance in Washington, D.C.

Among the NRI positions eliminated are compliance, garnishment operations, and administrative managers and assistants, as well as a shuttle bus driver, leadership developer and various training, outreach and analyst positions.

The 248 workers affected join the ranks of 239,2632 Minnesotans who filed for unemployment benefits since March 16, state officials said. NRI appears to be Minnesota’s first debt-collection agency to suffer large layoffs due to a coronavirus relief package.