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The share of borrowers who are 60 or more days behind in their auto loan payments was 26.7% higher in December than it was a year earlier.
Once your payment is 30 days late, lenders report the delinquency to the credit-reporting firms, and your credit score will take a hit.
If you are having trouble paying on time, here are some things you can do to prevent the situation from getting worse.

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For a rising share of car owners, monthly auto loan payments appear to be evolving into a problem.
While borrowers who are behind on their payments by more than 60 days represent a tiny portion of all outstanding auto loans — 1.84% — their ranks are growing, according to a recent report from Cox Automotive. The share was 26.7% higher in December than the year-earlier month and is largely concentrated among borrowers with low credit scores.

“The danger of struggling to pay an auto loan is not just risking your car getting repossessed, it’s the long-term impact on all of the other areas of your finances,” said certified financial planner Angela Dorsey, founder of Dorsey Wealth Management in Torrance, California.

High prices, interest rates have led to bigger payments

A combination of market factors have pushed up monthly loan payments. And as personal savings have dwindled and persistent inflation has squeezed household budgets, keeping up with payments may become even more challenging.
The average price paid for a new car reached a record $47,362 in December, according to an estimate from J.D. Power and LMC Automotive. 
Monthly payments in the fourth quarter averaged $717, compared with $659 a year earlier, according to Edmunds. The share of buyers who took on monthly payments of $1,000 or more reached 15.7%, compared with 10.5% a year earlier. In the fourth quarter of 2020, just 6% of borrowers had monthly auto payments that large.
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Rising interest rates also have affected affordability. The average rate paid on a new car loan was 6.5% at the end of 2022, Edmunds data shows. For used cars, the average was 10%. A year earlier, those rates were 4.1% and 7.4%, respectively. 

Loan delinquencies can harm your credit score

While the auto loan delinquency rate is edging higher, the default rate is not, according to Cox. Entering default — when your lender determines you are not going to pay, usually some time after 90 days of no payments — can translate into your car being repossessed.
Yet even being too late on one payment has a negative effect on your financial life, and it can be long-lasting.
“If you’re 30 days late, it impacts your credit score,” said Brian Moody, executive editor of Kelley Blue Book.

That’s when lenders typically report the late payment to credit-reporting firms Equifax, Experian and TransUnion.
Also, you should be aware that because your payment history is the most influential factor in your credit score — it typically accounts for 35% of it — you could see a drop of 100 points due to being 30 days late with a payment, according to NerdWallet. The longer the loan goes unpaid, the bigger the hit to your score, and that delinquency can remain on your credit report for up to seven years.
As consumers generally know, the lower your score, the more likely you are to pay higher interest rates on new loans or credit you get. Additionally, a poor score or poor credit history may cause you to pay higher premiums on auto or homeowner’s insurance and affect your ability to rent an apartment or even get a job. Employers can’t see your score, but they can check your report.

What to do if you’re struggling with auto loan bills

For car owners who are pretty sure they’re heading toward delinquency, it’s important to try preventing the problem from snowballing.
“If you sense this is coming, be on top of it,” Moody said. “Don’t do nothing. It won’t get better on its own.”
If you’re struggling to keep up because you don’t budget well, that’s at least potentially fixable, experts say. In that case, take a hard look at how you’re spending money.

“Take a look at your overall expenses for the last few months,” said Joe Pendergast, vice president of consumer lending for Navy Federal Credit Union. “You would be amazed how much the average person spends each month without realizing it.”
However, if the payments are simply not manageable, the first thing you should do is bring your lender into the loop.
“If a consumer is struggling to make their car payments, or anticipates challenges ahead, they should reach out to their financial institution as soon as possible,” Pendergast said.

The sooner your bank or credit union is made aware, the easier it is to come up with possible solutions.

Joe Pendergast
Vice president of consumer lending for Navy Federal Credit Union

“The sooner your bank or credit union is made aware, the easier it is to come up with possible solutions,” he said.
While the options vary from lender to lender, you may be able to get a deferment — i.e., a few months without a payment — or a new loan that lowers the payments by stretching out the length. Either way, be aware that this generally would lead to paying more in interest, noted Moody of Kelley Blue Book.
However, a deferment would at least give you time to figure out how to best manage your situation, he said. 

For example, you could sell your car with the intent of buying a lower-priced one — or, perhaps, even going without one if you have other transportation options. Just be aware that depending on how much you owe on the loan, the price you get for your car may not fully cover your balance, which would mean you’d still owe the lender money.
There may be a similar value gap if you opt to trade it in. While trade-in amounts have been relatively high due to used-car values being elevated, that is changing. The latest inflation reading showed a year-over-year drop of 8.8% in used car prices.
And if the amount a dealer is willing to give you is less than what you owe on the loan, you will either need to pay off the remaining balance or roll it into your new loan. This so-called negative equity averaged $5,341 in the last quarter of 2022, Edmunds data shows.
“None of these [options] are ideal,” Moody said. “They are all under the heading ‘better than nothing.'”

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The January jobs report issued by the Bureau of Labor Statistics showed strong job growth that handily beat expectations.
Other labor market data issued this week — the Employment Cost Index and the Job Openings and Labor Turnover Survey — also showed a hot job market defying recession fears.
Overall, wage and job growth are strong, layoffs are low, and workers are showing confidence in job prospects.
However, the Federal Reserve is raising interest rates and trying to cool the labor market.

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1. Unemployment is at historic lows

The unemployment rate fell to 3.4% in January — the lowest since May 1969. Put another way: The last time the jobless rate was this low, Neil Armstrong hadn’t yet walked on the moon, Bunker said.
In fact, you’d have to go back to October 1953 to find a lower unemployment rate — 3.1%.

The unemployment rate is a single-best labor market indicator for the average American — it offers a holistic look at its strength or weakness and a reliable gauge for potential recession, said Daniel Zhao, lead economist at Glassdoor, a career site.

“The job market is still strong, and workers have opportunities to go out and find a job that’s a better fit for them,” Zhao said.
U.S. employers added 517,000 new jobs in January, handily beating expectations. They added 4.8 million total jobs in 2022, more than twice the roughly 2.3 million average from 2015 to 2019, said Julia Pollak, chief economist at ZipRecruiter.

2. Layoffs are low despite Big Tech

Big technology firms — such as Amazon, Google, Meta and Microsoft — announced mass layoffs in recent weeks. Those job cuts, which affect tens of thousands of employees, prompted fears the carnage would spill over into other areas of the U.S. economy.
However, that doesn’t seem to be happening.
“The thing that strikes me the most about the labor market is there aren’t layoffs,” said Mark Zandi, chief economist at Moody’s Analytics.

The layoff rate has stayed below its pre-pandemic nadir for 22 straight months, according to Job Openings and Labor Turnover Survey data. Workers filed 183,000 new claims for unemployment insurance last week — well below the roughly 245,000 average from 2015 to 2019, according to Labor Department data.
“That is just knock-your-socks-off low,” Zandi said of unemployment claims.
Businesses are reluctant to lay off workers and the labor market is strong enough to rapidly absorb people who do lose their jobs, Zandi said.
Tech jobs also account for a small share of the U.S. workforce: about 4% of total employment in 2020, according to a Deloitte report published in 2021.

3. The ‘great resignation’ chugs along

Workers are still quitting their jobs in historically elevated numbers.
Most workers who quit do so for new jobs; they don’t leave the workforce altogether. Voluntary departures are therefore a proxy for worker confidence — they’re optimistic about their chances of finding a better job elsewhere, economists said.

About 4.1 million people quit in December, according to JOLTS data issued Wednesday.
That figure is a slight cooling from the peak of over 4.5 million in November 2021 — but still well above the pre-pandemic high bar of 3.6 million set in July 2019.
The elevated level of quitting in the pandemic era came to be known as the “great resignation.” In 2022, 50.5 million people quit their jobs — breaking an annual record set in 2021.

4. Hiring has moderated

Hiring remains strong but has been decelerating. The hiring rate and number of new hires have cooled since February 2022; they’re roughly on par with their level in February 2020.
That’s not necessarily a bad sign — the job market was also strong in the runup to the pandemic.
Businesses are adjusting to higher interest rates and the prospects of recession — not necessarily via mass layoffs but instead by hiring less aggressively, Zandi said. Data suggests employers are allowing jobs vacated by quitting workers to go unfilled, he said.

5. Wage growth is high but cooling

Wages are growing at a historically fast pace — especially for those switching jobs. But there’s a cooling trend here, too.
Wages and salaries for private-sector workers grew about 4% in the fourth quarter of 2022, on an annualized basis — above the pre-pandemic pace but down from 6% at the end of 2021, Bunker said. He analyzed Employment Cost Index data issued Tuesday and excluded incentive-paid occupations, which can be volatile.
“The slowdown is definitively here,” Bunker said of wage growth.
Average hourly earnings in January cooled to a 4.4% annual growth rate, according to Friday’s jobs report, falling from 4.6% in December and 5.1% in November.
“It may not be as easy today as it was a year ago to find a higher-paying job,” Zhao said. “But there are still opportunities out there.”

6. The labor market is ‘out of balance’

This cooling in pay growth is by design. The Federal Reserve is aiming to reduce wage growth to what it sees as a more sustainable level — one that doesn’t fuel high inflation.
Fed Chairman Jerome Powell on Wednesday said the labor market was “very, very strong” due to job creation and wages — but also noted that it was “out of balance.” Largely, that’s because labor demand among employers “substantially exceeds” the supply of available workers, Powell said, which has underpinned fast-rising wages.
The Fed is trying to soften the labor market without triggering a recession — a so-called “soft landing.”
Reducing wage growth to 3.5%, as measured by the Employment Cost Index, would be consistent with the Fed’s long-term 2% inflation target, Zandi said.

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Some new beneficiaries have faced months-long delays in coverage when they signed up for Medicare, depending on their situation.
Generally speaking, those gaps are eliminated, although there may still be late penalties involved in certain instances.
It may now also be possible to sign up outside of set enrollment periods if the reason you didn’t enroll was due to “exceptional circumstances.”

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As of this year, people new to Medicare won’t face big delays in coverage — an unenviable situation that some beneficiaries used to find themselves in.
Thanks to legislation passed in late 2020, months-long delays in certain Medicare enrollment circumstances are now eliminated. Additionally, individuals who missed signing up when they were supposed to due to “exceptional circumstances” may qualify for a special enrollment period.

“It’s really about having access to pretty essential health services,” said Casey Schwarz, senior counsel for education and federal policy at the Medicare Rights Center.
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Delays in coverage meant possibly facing a gap in health insurance — which in turn could have translated into either being unable to get needed care due to financial constraints or paying out of pocket for care, whether planned or an emergency.

Signup rules for Medicare can be tricky

Medicare’s enrollment rules can be confusing. People who are already receiving Social Security benefits before the reach age 65 — which is when you become eligible for Medicare — are automatically enrolled in Part A (hospital coverage) and Part B (outpatient care coverage).
Otherwise, you are required to sign up during your “initial enrollment period” when you hit age 65 unless you meet an exception, such as having qualifying health insurance through a large employer (20 or more workers).

Initial enrollment period gap is eliminated

Your initial enrollment period starts three months before your 65th birthday and ends three months after it (seven months total). The new rule makes it so coverage takes effect the month after you sign up if you do so in the latter part of that enrollment window. In the past, some beneficiaries waited up to three months for coverage to take effect.
If you enroll before the month you turn 65, coverage starts the first of your birthday month (that hasn’t changed).

Penalties may still apply for some late enrollment

If you miss your initial enrollment period and don’t qualify for a special enrollment period, you generally can only sign up during the first three months of the year during a “general enrollment period.”
Going that route also has meant waiting until July 1 for coverage to take effect. Starting this year, it will be effective the month after you sign up.

However, in that situation, there may still be a late-enrollment penalty. For Part B, it’s 10% of the standard premium ($164.90 for 2023) for each 12-month period you should have been enrolled but were not.
Part D also comes with a late-enrollment fee. It’s 1% of the “national base premium” — $32.74 in 2023 — multiplied by the number of months that you went without Part D since your enrollment period (if you didn’t have qualifying coverage in place of it). 
In both cases, late-enrollment penalties are generally life-lasting.

‘Exceptional’ situations may result in special enrollment

Starting this year, individuals may be able to sign up outside of current enrollment periods if they have “exceptional circumstances.” This is already a flexibility available with Part D, as well as Medicare Advantage Plans (which deliver Parts A and B and usually D), Schwarz said.
“It’s really designed to provide relief for people who are impacted by exceptional situations and need access to health insurance,” she said.
Additionally, beneficiaries who qualify for the special enrollment period will not face Part B late enrollment penalties.

There are situations where … people make mistakes. So these rules allow some flexibility.

Casey Schwarz
Senior counsel for education and federal policy at the Medicare Rights Center

Until this rule change, the only way to qualify was if a government official provided bad information or made a mistake that caused you not to enroll.
“There are situations where … people make mistakes,” Schwarz said. “So these rules allow some flexibility.”
Some qualifying circumstances could include an employer providing inaccurate information about Medicare enrollment, or they were in a situation where it was impossible or impractical to enroll, such as being in a natural disaster or incarcerated.

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The Supreme Court is set to hear arguments over President Joe Biden’s student loan forgiveness plan in late February.
Federal student loan payments won’t resume until the end of August, unless the litigation over the Biden administration’s student loan forgiveness plan is resolved sooner.
Here’s what borrowers need to know about the ongoing payment pause.

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It’s been nearly three years since most people with federal student loans have had to make a payment on their education debt.
The U.S. Department of Education has repeatedly cited specific dates for when the bills would resume, only to extend the pandemic-era break yet again.

Most recently, amid legal challenges to the Biden administration’s student loan forgiveness plan, the government told borrowers they’d get even more time. But the timing it gave wasn’t as straightforward as it was with previous extensions.
Here’s what borrowers need to know.

Student debt bills may not resume for months

In August 2022, President Joe Biden promised to cancel up to $20,000 of student loan debt for tens of millions of Americans, but Republicans and conservatives quickly filed a number of lawsuits against his plan, forcing the administration to close its application portal in early November.
As a result of those challenges, the Education Department announced another extension of the repayment pause in late November.
It said federal student loan bills will be due again 60 days after the litigation over its student loan forgiveness plan resolves and it’s able to start wiping out the debt. But the Department added that if the Biden administration is still defending its policy in the courts by the end of June, or if it’s unable to move forward with forgiving student debt by then, the payments will pick up at the end of August.

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The Supreme Court will begin to hear oral arguments over Biden’s plan at the end of February.
When payments could resume depends in part on when the justices reach their decision, said higher education expert Mark Kantrowitz.
“If the court issues a ruling a few weeks after the Feb. 28 hearing, repayment could restart in May or June,” Kantrowitz said. “If they wait until the end of the term, when they go on recess, in June or July, then there would be an August or September restart.”

Another payment pause extension is possible

It’s a time of uncertainty for the federal student loan system.
With Biden’s forgiveness plan up in the air, borrowers may be unsure what they owe. Throughout the pandemic, there have been a lot of changes to the companies that service federal student loans. And then there’s the fact that after three years without payments, millions of Americans have simply become accustomed to life without student debt bills.
“These student loan borrowers had the reasonable expectation and belief that they would not have to make additional payments on their federal student loans,” Education Department Undersecretary James Kvaal said in a November court filing. “This belief may well stop them from making payments even if the Department is prevented from effectuating debt relief.
“Unless the Department is allowed to provide one-time student loan debt relief,” he went on, “we expect this group of borrowers to have higher loan default rates due to the ongoing confusion about what they owe.”
Considering that the U.S. Department of Education has already extended the payment pause roughly eight times, it’s possible borrowers could get more time still, Kantrowitz said.
“There will always be an excuse if they want a reason for another extension,” he said. “The most likely reasons could include a new worrisome Covid-19 mutation or economic distress.”

For now, collection activity still on pause

The U.S. government has extraordinary collection powers on federal debts and it can seize borrowers’ tax refunds, wages and Social Security checks if they fall behind on their student loans.
During the extended payment pause, however, the Education Department also says it won’t resume collection activity.
Borrowers in default on their student loans should also look into the recently announced “Fresh Start” initiative, in which they’ll have the opportunity to return to a current status.

Make the most of extra cash during the ongoing break

With headlines warning of a possible recession and layoffs picking up in some sectors, experts recommend that borrowers try to salt away the money they’d usually put toward their student debt each month.
Certain banks and online savings accounts have been upping their interest rates, and it’s worth looking around for the best deal available. Consumers will just want to make sure any account they put their savings in is insured by the Federal Deposit Insurance Corp., meaning up to $250,000 of the deposit is protected from loss.
And while interest rates on federal student loans are at zero, it’s also a good time to make progress paying down more expensive debt, experts say.
The average interest rate on credit cards is currently more than 20%.

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Total credit card debt reached a record $930.6 billion in the fourth quarter of 2022, according to the latest credit report from TransUnion.
As balance rise, so have delinquencies, which is “something to watch,” says TransUnion’s Michele Raneri.

For most Americans, inflation and rising interest rates are a one-two punch.
On the heels of another rate hike this week by the Federal Reserve, credit card annual percentage rates are already near 20%, on average, and set to climb even higher. At the same time, more consumers are leaning on credit to afford increasingly expensive necessities, like food and rent.

That helped propel total credit card debt to a record $930.6 billion at the end of 2022, a 18.5% spike from a year earlier, according to the latest quarterly report by TransUnion.
The average balance rose to $5,805 over that same period, TransUnion found.
At nearly 20%, if you made minimum payments toward this average credit card balance, it would take you more than 17 years to pay off the debt and cost you more than $8,213 in interest, Bankrate calculated.

“Whether it’s shopping for a new car or buying eggs in the grocery store, consumers continue to be impacted in ways big and small by both high inflation and the interest rate hikes implemented by the Federal Reserve,” said Michele Raneri, vice president of U.S. research and consulting at TransUnion.
Overall, an additional 202 million new credit accounts were opened in the fourth quarter, led by originations among Generation Z, or adults ages 18 to 25, and the tally of total credit cards hit a record 518.4 million.

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As the number of credit card accounts in the U.S. rises, more new customers are subprime borrowers, generally meaning those with a credit score of 600 or below, according to TransUnion, in part because of the flood of younger borrowers gaining access to credit cards. 
But at the same time, delinquencies rose as lenders expand access to less-experienced credit users, the report found. TransUnion defines a delinquency as a payment that’s 60 days or more overdue.
“The increase in delinquencies is something to watch,” Raneri said. As long as unemployment stays down, households are better able to pay their bills, she noted. “If unemployment goes up, and we see a spike in delinquencies, then that indicates a longer-term problem.”
For now, the unemployment rate is at a 53-year low, after a better-than-expected January jobs report.

How to tackle high-interest credit card debt

“Cardholders do have options, though,” said Matt Schulz, chief credit analyst at LendingTree. Zero percent balance transfer credit card offers are even more plentiful than they were a year ago and remain one of the best weapons Americans have in the battle against credit card debt, he said.
Borrowers may also be able to refinance into a lower-interest personal loan. Those rates have climbed recently, as well, but at 10%, on average, are still well below what you currently have on your credit card, according to Schulz.
Otherwise, go back to the basics, advised Ted Rossman, senior industry analyst at Bankrate.
“Take on a side hustle, sell stuff you don’t need, cut your expenses,” he said. “A dollar saved is a dollar earned, and every dollar of credit card debt that you pay down has an average guaranteed, tax-free return of about 20%.”
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This week marks the 30th anniversary of the Family and Medical Leave Act, which lets qualifying workers take unpaid time off to care for loved ones or recover from their own health issues.
Democrats are introducing legislation to address gaps in the law’s coverage, with the ultimate goal of putting a national paid leave policy in place.

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As Democratic lawmakers honor the anniversary of a national family and medical program for workers, they are calling for a national paid policy that would bring the U.S. in line with other industrialized nations.
This Sunday, Feb. 5, marks the 30th anniversary of the Family and Medical Leave Act, legislation that lets workers who qualify take unpaid time off from their jobs to care for loved ones or recover from their own illnesses or health conditions.

The FMLA was signed into law by former President Bill Clinton in 1993. Since then, it has allowed workers to be with their families when a child was born or when relatives were sick, Clinton said at a White House event Thursday.
“There are still a lot of problems that can’t be solved without some form of paid leave,” Clinton said.
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The anniversary comes as Democrats passed a paid leave proposal in the House in 2021. Yet those changes failed to make it into a broader legislative package.
About 56% of workers have access to unpaid leave under the Family and Medical Leave Act, according to research from the Urban Institute.

Workers who are excluded include those who have been at a work site for less than a year, those whose work sites have fewer than 50 employees within a 75-mile radius and those who worked less than 1,250 hours at their employer in the past year.
“People need to understand that as great as this was, there are still a lot of people left out,” Clinton said.

‘We need paid leave’

Juggling personal responsibilities and work can lead to tough trade-offs.
Workers missed out on approximately $28 billion more in wages from March 2020 to February 2022 compared with the previous two years due to a lack of access to paid leave, research from the Urban Institute has found.
About 5 million women lost their jobs during the Covid pandemic, Sen. Kirsten Gillibrand, D-N.Y., noted during a Wednesday news conference. Had a federal paid leave policy been in place, many of those women may have been able to stay employed, she said.
“Imagine if, during the pandemic, we had had a national paid leave program,” Gillibrand said.

We need to make sure we’re covering these front-line workers who are taking care of our children.

Sen. Tammy Duckworth
Democrat of IIlinois

“It would have changed everything,” she added. “We would have been able to have an economy that continued to thrive.”
Sen. Tammy Duckworth, D-Ill., said the gaps in protection under FMLA policy affected her family personally when she was injured while serving in the military in Iraq.
Duckworth’s husband was able to care for her by taking unpaid time off, but it cost him his contract job as a military science professor.
“As soon as his FMLA ran out, which was unpaid, they were like, ‘Thank you, you don’t need to come back,'” Duckworth said.

Sen. Tammy Duckworth, D-Ill., and Ukrainian soldier Oleksandr Chaika demonstrate their prosthetic legs. Chaika lost his leg by amputation due to a tank shell explosion in Ukraine. Duckworth lost her legs when her helicopter was shot down in Iraq.
Tom Williams | Cq-roll Call, Inc. | Getty Images

“This is how cutthroat it is out there,” she added. “We need paid leave.”
Democrats reintroduced bills on Wednesday aiming to make paid leave a federal policy, while also expanding protections to more workers under the FMLA.
The Family and Medical Insurance Leave Act, or FAMILY Act, was reintroduced by lawmakers including Gillibrand and Rep. Rosa DeLauro, D-Conn., with the goal of creating the first paid national family and medical leave program.
The U.S. is the only industrialized nation without a paid family and medical leave policy, the lawmakers noted.
The FAMILY Act proposal calls for 12 weeks’ paid leave. It would include all types of life events and cover all caregivers, including those who are not members of an immediate family unit, Gillibrand said.

“It is a reasonable, pragmatic way to get to paid family leave,” Duckworth, who is a co-sponsor of the bill, told CNBC.com in an interview.
The plan would let both employers and employees pay into an insurance program, which would cost about $2 per week, Duckworth said. Workers would be able to take up to 80% of their salary while taking care of a family member or taking time for a personal illness.
Alongside Rep. Sean Casten, D-Ill., Duckworth also reintroduced another bill, the ESP and School Support Staff Family Leave Act, which would provide education support professionals with unpaid leave under the FMLA.
Covered workers would include school bus drivers, cafeteria workers, nurses and administrative staff who do not meet the hourly work requirements during the school year in order to qualify for FMLA coverage.

The Education Support Professionals Family Leave Act would provide education support workers such as school bus drivers with unpaid leave under FMLA.
Marilyn Nieves | Moment | Getty Images

“People don’t realize that the school nurse who’s checking your children for Covid, she does not get FMLA,” Duckworth said. “We need to make sure we’re covering these front-line workers who are taking care of our children.”
Separately, Sen. Tina Smith, D-Minn., and Rep. Lauren Underwood, D-Ill., proposed the Job Protection Act, which would expand FMLA protections to workers who have changed jobs or are returning to the workforce, work part time or are employed by smaller employers.

State plans may influence support

Duckworth said she hopes her bill passes this year, while also pointing to the need for a federal paid leave program.
“Having gone through the pandemic, people realize how important it is to have paid family leave,” Duckworth said. “We need it to be competitive on a global scale.”
Part of the opposition to enhancing paid leave policies has come from businesses that fear it will lead to higher costs.
About 11 states and Washington, D.C., have enacted their own paid family and medical leave policies.
“As different state plans pop up, it may generate additional support for paid leave at the federal level and for a more uniform solution for all workers,” said Chantel Boyens, principal policy associate at the Urban Institute’s Income and Benefits Policy Center.
A national policy would likely help low-wage workers, who tend to be most affected by gaps in the current federal policies, she noted.
“One of the potential benefits of a national policy is you have something that applies to all workers,” Boyens said.

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Challenges to President Joe Biden’s student loan debt relief plan are set to be heard by the U.S. Supreme Court.
Republicans and conservative groups have now brought at least six lawsuits against Biden’s plan.
Arguments against the plan hinge on claims the federal government is overstepping its authority and harming some people financially.

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Plan ‘vastly exceeds’ Heroes Act authority

The six states — Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina — argue in their brief that the Biden administration has overstepped its authority by moving to cancel up to $20,000 in student debt for tens of millions of Americans without Congress’ authorization.
The Biden administration insists that it’s acting within the law, pointing out that the Heroes Act of 2003 grants the U.S. secretary of Education the authority to make changes to the federal student loan system during national emergencies (the U.S. has been operating under an emergency declaration since March 2020 because of the Covid pandemic). The law is a product of the 9/11 terrorist attacks, and an earlier version of it provided relief to federal student loan borrowers impacted by the attacks.

However, the states counter that the Heroes Act allows the Education secretary only to modify the federal student loan system to keep certain borrowers from being in a worse-off position with their loans because of a national emergency.

They go on to say, in their brief, that the president’s plan “places an estimated 43 million Americans in a better position by eliminating all loan balances for 20 million and erasing up to $20,000 for over 20 million more. This vastly exceeds the Secretary’s authority under the Act.”
In other words, higher education expert Mark Kantrowitz said, the states are asserting that Biden is using Covid as an excuse to pass his plan.
“For example, if it was an emergency, why wait three years to provide the forgiveness?” he said. “Why present it in a political framework, as fulfilling a campaign promise?”
The states also argue that Biden’s plan would cause financial harm to their states, including a loss of profits for the companies that service federal student loans.

Borrowers deprived of ‘procedural rights’

Boonchai Wedmakawand | Moment | Getty Images

The second legal challenge the Supreme Court will consider was backed by the Job Creators Network Foundation, a conservative advocacy organization.
In its brief, the lawyers argue that two plaintiffs, Myra Brown and Alexander Taylor, were deprived of their “procedural rights” by the Biden administration because it didn’t allow the public to formally weigh in on the shape of its student loan forgiveness plan before it rolled it out. As a result, the lawyers argue, Brown and Taylor are either partially or fully excluded from the relief.
The Heroes Act exempts the need for a notice-and-comment period during national emergencies, but, like the states, the plaintiffs in this challenge also argue that that law doesn’t authorize the president’s sweeping plan.

How White House defends loan forgiveness

In its arguments to the highest court submitted last month, lawyers for the Education Department and U.S. Department of Justice argued that the challenges to the plan were brought by parties that failed to show harm from the policy, which is typically a requirement to establish so-called legal standing.
The attorneys also denied the claim that the Biden administration was overstepping its authority, laying out the White House’s argument that it is acting within the law under the Heroes Act of 2003.

“We remain confident in our legal authority to adopt this program that will ensure the financial harms caused by the pandemic don’t drive borrowers into delinquency and default,” U.S. Secretary of Education Miguel Cardona said in a statement.
The Supreme Court will begin to hear the cases on Feb. 28.

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Smart Tax Planning

Last year, there were close to 8 million reports of suspicious activity related to income tax filing and identity theft.
More than 90% of tax returns were filed online last year and phone, email and text scams always increase during tax season.
There are several important cybersecurity steps filers should take in advance of using tax prep software or working with an accountant, who are also targets of scammers.

Constantine Johnny | Moment | Getty Images

Tax season has begun, and it typically comes with a big uptick in tax-related scams.
There were nearly 7.8 million reports of suspicious activities in 2022, according to a recent report from the Identity Theft Tax Refund Fraud Information Sharing Mission & Analysis Center, a partnership between the IRS, companies and states.

The tax scamming is taking place during an environment of rising fraud across the nation. U.S. consumers lost more than $5.8 billion to fraud in 2021, a 70% increase from the year before, according to the Federal Trade Commission.  
With online filing now the norm — the IRS said 92% of tax returns last year were filed electronically — cybersecurity is more important now than ever.

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Popular tax filing platforms such as TurboTax, H&R Block and TaxAct invest in security and have to follow regulatory requirements around it. The big tax prep companies in the U.S. have to go through a compliance and audit process to be able to store data, said Nicholas Donarski, chief technology officer and co-founder of blockchain technology firm ORE System. He added this should lead tax filers to make sure they pick a reputable tax platform, and “not just the cheapest one.”
But just because tax filing platforms implement security measures doesn’t mean its users are off the hook when it comes to personal cybersecurity best practices.
“The biggest issue isn’t so much on the security program of providers as it is we humans as users of those platforms,” said Lisa Paggemier, executive director at the National Cybersecurity Alliance.

Here are steps consumers can take to protect themselves.

Use secure passwords and multi-factor authentication

Despite all the warnings about using secure passwords (tip: don’t use the name of a pet) and using different passwords for every website, few people actually do this.
Cybersecurity experts suggest using a password manager that stores account credentials. Despite recent headlines about some big password managers having their customer data hacked, using such an application is “still the most secure, so long as you secure that as well with multi-factor authentication,” Paggemier said.
Multi-factor authentication requires users to prove their identity in two ways, usually through a password as well as a one-time code sent to their phone or email, or a fingerprint. While TurboTax, TaxAct and H&R Block all offer multi-factor authentication and advise users to layer on this added cyber protection, it’s not required.
“This is an important step to help secure your online account from identity thieves,” said Kathy Pickering, chief tax officer at H&R Block. “Providing your mobile phone to do this is better than providing your email because it’s more secure and may be faster.”

File taxes promptly, before someone impersonates you

It’s understandable to procrastinate when faced with a dreaded task like filing taxes, but Paggemier said being prompt can help ward off potential fraud. The sooner you file, the “less time you give the bad guy to file on your behalf,” she said.
Tax filing fraud is similar to the many unemployment scams during the pandemic when scammers filed in other people’s names to steal benefits. With tax returns, scammers file a false return with fraudulent data and collect the refund. 
TaxAct has built in an extra layer of security into its platform around Social Security numbers, which will notify users in case someone has already entered the same number. It also flags mistakes that legitimate users make when entering their Social Security number.
“It helps to either identify typos in your SSN that could delay your refund or alert you to possible preexisting identity theft,” said Mark Jaeger, vice president of tax development at TaxAct.
TaxAct said its platform will notify customers in case another return was filed using the same Social Security number, even if the initial filing was through a different software provider. 
Another layer of protection is to get an identity protection PIN, which prevents someone else from filing a tax return using your Social Security number or individual taxpayer identification number. 
The IRS sends a new IP PIN to victims of tax-related theft every year. This year, the agency has opened up the process, allowing anyone with a Social Security number or individual taxpayer identification number who can verify their identity to enroll in the program by filling out an application online.

Be alert for scam emails, texts and calls

Scam emails and texts occur year-round but tend to accelerate during tax season. Scammers may pose as IRS agents, tax preparation companies and other parties, the IRS has warned. 
“You see an increase in the number of attacks … they use that emotional response, that fear that we call it in the industry FUD — fear, uncertainty and doubt,” Donarski said.
One twist this year: the arrival of ChatGPT, which could make scam messages harder to detect. Poor spelling or grammar and funky fonts or graphics have been common giveaways in past years, but the use of artificial intelligence like ChatGPT can change that factor.
Cybersecurity experts said the advice is still the same to ward off fraudsters: Don’t click on any links. If there’s any doubt, go to a site you know to be legit to check your tax filing, bank or credit card account, or call the official number listed on the back of a card or the official website.

You have to be your own champion when it comes to your privacy and your security.

Nicholas Donarski
chief technology officer and co-founder of ORE System

Keatron Evans, principal cybersecurity advisor at Infosec, noted a recent increase in scam calls claiming to be from a tax provider, alerting victims that they’ve noticed a problem and should go to a website to download a plug-in. “People are now desensitized … so they feel like if they’re talking to a person, telling them to go click on a URL or something like that it’s probably more legit, when it absolutely is not.”
Phone scammers also frequently impersonate IRS agents, scaring victims by demanding immediate payment using prepaid debit cards, gift cards or wire transfer and threatening to bring in local police. The IRS has issued warnings about this scam and recommends that victims report it to the Treasury Department’s Inspector General using an online form or calling the agency, or reporting it to the IRS by email with “IRS Phone Scam” in the subject line.

Install tax prep software updates

Just as tax prep platforms need to ensure the security of data while in transit and when storing it, users should too by securing their home network and computer. Computers running on old software are more vulnerable to attacks.
“A lot of times, these software are vulnerable to attack and exploitation because bad guys know that at this time of year people are going to have these things installed on their computers. So they target them for vulnerabilities,” Evans said. To minimize this risk, install software updates for tax prep software or plug-ins as soon as they are available. That also goes for other software updates, such as the operating system or browser.
Secure Wi-Fi passwords can also help ensure security of the home network, in addition to making sure antivirus software is installed and up to date. For anyone who needs to use a public network for their taxes or any other sensitive information, cybersecurity experts advise using a virtual private network, or VPN.

Vet your accountant’s cybersecurity practices

Not all electronic tax filings are done through well-known tax platforms, with many filers working with accountants or accounting firms. Increasingly, tax professionals are also targeted by scammers. Cybersecurity experts said you should ask some questions about how the accountant is storing and backing up data, how they are securing it or encrypting the data, and how the office is secured.
“If you’re dropping tax documents into Google Docs or Google Drive or something like that, I would probably question where the storage is,” Donarski said since these files are not encrypted.
Accountants and accounting firms should be asking clients to upload to a secure platform or to use something like an Adobe- or Microsoft-encrypted file-transfer system. And with home offices more common, don’t hesitate to ask tax preparers about how they’re securing their home Wi-Fi network or if they use a VPN.
“You have to be your own champion when it comes to your privacy and your security,” Donarski said. More