A Debt-Financed Life: Does It Preclude or Induce the Transition to First Cohabitation or Marriage?

Fenaba Addo, Cornell University

This paper explores the role of consumption debt on young adult transitions into first unions, both marital and cohabiting. For many young adults, assuming the debtor role may serve as a vehicle for achieving financial independence (Arnett, 2004) an important step in the transition to coresidential relationships. Given that the theoretical predictions of consumption smoothing with debt are ambiguous given the dependence on the timing, quantity, and quality of the debt,(Chiteji, 2007) and existing research suggesting that the economic and financial “underpinnings” for cohabitation and marriage may not necessarily be congruent (Kravdal, 2010; Sassler, 2004; Clarkberg,1999), I hypothesize that a large debt load may act as a precursor to cohabitation but as a hindrance to marriage. Using the NLSY97, I follow approximately 4,000 from age 18 through age 25 and analyze the effect of early exposure to credit card and other non-collateralized debt on transitioning to their first coresidential relationship.