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Most young households simultaneously hold both unsecured debt on which they pay an average of 10 percent interest and social security wealth on which they earn less than 2 percent. We document this fact using data from the Panel Study of Income Dynamics. We then consider a life-cycle model with optimizing and "rule-of-thumb" households and explore ways to reduce this inefficiency. We show that both allowing households to use social security wealth to pay off debt and exempting young householdsdoi:10.3386/w10282 fatcat:ffx6lz6oure6vokcskvl6j7loq