Returning to the Nest: Debt and Parental Co-Residence Among Young Adults

53 Pages Posted: 19 Oct 2014  

Lisa J. Dettling

Board of Governors of the Federal Reserve System

Joanne W. Hsu

Federal Reserve Board of Governors

Date Written: September 2, 2014

Abstract

This paper examines the relationship between a young adults' debt burden and the decision to co-reside with a parent. Using a quarterly panel of young adults' credit histories, and controlling for age, country, and quarter fixed effects, and local demographic characteristics, unemployment rates, and house prices, we estimate the relationship between current period debt and subsequent decisions to co-reside with a parent. Our results indicate that indebtedness -- increases flows into parental co-residence. Moreover, after moving in, delinquency and low credit scores increase time spent in co-residence. We find that the changing debt portfolios of young adults over this period -- characterized by rising student loan debt and small declines in credit card, auto and mortgage debt -- can predict 30 percent of the observed increase in flows into co-residence, and 26 percent of the observed increase in time spent in co-residence.

Keywords: Consumer debt, household formation, delinquency, boomerang generation

JEL Classification: D14, J11, D91

Suggested Citation

Dettling, Lisa J. and Hsu, Joanne W., Returning to the Nest: Debt and Parental Co-Residence Among Young Adults (September 2, 2014). FEDS Working Paper No. 2014-80. Available at SSRN: https://ssrn.com/abstract=2511411 or http://dx.doi.org/10.2139/ssrn.2511411

Lisa J. Dettling

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Joanne W. Hsu (Contact Author)

Federal Reserve Board of Governors ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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