Debt over the Lifecycle

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Abstract: How does household debt evolve over the lifecycle? Relative to lifecycle earnings and consumption, lifecycle debt profiles are understudied. Using age profiles generated from new panel data on millions of homebuyers, I show that mortgage debt dwarfs other types of debt. I demonstrate that it tends to peak at the age of first home purchase before declining linearly thereafter. Moreover, I report skewness and kurtosis, which indicate that debt distributions change over the lifecycle and depart from normality/log-normality. Finally, I develop a simple model to explain mortgage debt trajectories; I demonstrate that individual-specific variation and a new loan/refinance mechanism are important for explaining the data.