There's an $80 billion 'elephant in the room' that could be worse than a recession for Wal-Mart, Home Depot and Costco

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Santelli Exchange: Giant student loan debt



America's largest retailers are facing a threat that is rarely discussed — student loan debt.

Consumers make $80 billion in loan payments a year, Moody's retail analyst Charlie O'Shea said on Bloomberg TV. This means they have less money to spend at retailers like Walmart, Home Depot, and Costco.

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"The average salary per college graduate has increased by only about 3% in the past seven years, while the average student debt burden has increased by roughly 53% over the same period" O'Shea told Bloomberg.

He says that America's more than $1.3 trillion in student loans could hurt the American economy more than a recession because it will last for decades to come.

2016 election issues: Education politics, student loans and the common core

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(MAIN) 2016 issues: Education politics, student loans, common core
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(MAIN) 2016 issues: Education politics, student loans, common core
A man carries a sign outside the Capitol during a march by public education supporters on Wednesday, March 11, 2015, in Albany, N.Y. Hundreds of public school students and parents rallied at the Capitol to urge lawmakers to boost school funding and reject Gov. Andrew Cuomo's education reforms. (AP Photo/Mike Groll)
In this Thursday, Oct. 2, 2014 photo, teacher Joy Burke checks on the work of her fifth grade students at John Hay Elementary school in Seattle. Burke is an "RCS" (Reduction in Class Size) teacher at the school, a new position there which allows her to give additional attention to students in math and reading skills. Education advocates in Washington state are pushing a measure limiting class sizes, but opponents worry the initiative on the November ballot could make a bad budget situation worse. Lawmakers are already scrambling to find cash to put more money into a series of education reforms under the Washington Supreme Court’s McCleary decision. (AP Photo/Elaine Thompson)
FILE - In this Jan. 6, 2015 file photo, Common Core opponents wave signs and cheer at a rally opposing Mississippi's continued use of the Common Core academic standards on the steps of the Capitol in Jackson, Miss. Results for some of the states that participated in Common Core-aligned testing for the first time this spring are out, with overall scores higher than expected though still below what many parents may be accustomed to seeing. (AP Photo/Rogelio V. Solis,File)
FILE - In this July 21, 2014 file photo, students at a summer reading academy at Buchanan elementary school work in the computer lab at the school in Oklahoma City. Results for some of the states that participated in Common Core-aligned testing for the first time this spring are out, with overall scores higher than expected though still below what many parents may be accustomed to seeing. (AP Photo/Sue Ogrocki,File)
Materials are piled onto a cart inside an adult education classroom at the Maryvale Community Education Building in Cheektowaga, N.Y., where students were preparing for the TASC test on March 23, 2015. The GED was overhauled last year to reflect the Common Core standards that have been adopted by most states and emphasize critical thinking. Two new high school equivalency exams that also incorporate some of those standards were also introduced last year. (AP Photo/Carolyn Thompson)
Nevada Assemblyman Brent Jones, R-Las Vegas, presents a measure in committee that would repeal Common Core K-12 education standards during a hearing at the Legislative Building in Carson City, Nev., on Wednesday, April 1, 2015. (AP Photo/Cathleen Allison)
FILE - In this March 19, 2015 file photo, former Florida Gov. Jeb Bush visits the Georgia Capitol in Atlanta. In the Republican roar over Common Core, various myths are being peddled as fact. Even so, the 2016 GOP presidential prospects who are criticizing Common Core have a point _ if an overstated one _ when they dispute the notion that it is strictly a voluntary initiative that bubbled up from communities and states. In complicated but unmistakable ways, the federal government does put pressure on states to live up to the standards. (AP Photo/David Goldman, File)
A personal note shares space with a family portrait and a "Stop Common Core" sticker on the name plate of House Judiciary B Committee chairman Andy Gipson, R-Braxton, on his document-laden desk in House chambers at the Capitol in Jackson, Miss., Thursday, March 12, 2015. Although some committee chairmen have separate offices in the Capitol, most spend the majority of their time on the floor of their respective chambers and try to personalize their work stations. (AP Photo/Rogelio V. Solis)
People protesting the Common Core education standards demonstrate near the hotel where the meeting of Tennessee's Education Summit is taking place on Thursday, Sept. 18, 2014, in Nashville, Tenn. Thursday's event titled "Progress of the Past, Present and Future" will involve elected officials and representatives from 24 organizations focusing on K-12 and higher education. (AP Photo/Mark Humphrey)
FILE - In this Feb. 26, 2014 file photo Indiana Republican Gov. Mike Pence embraces a preschool student at the Shepherd Community Center in Indianapolis. Pence's office says he signed a bill said Monday, March 24, 2014 pulling Indiana from reading and math standards that were adopted by most states around the country. (AP Photo/Tom LoBianco, File)
Karima Hawkins of Jackson, foreground, holds a sign against Common Core, the State Standards Initiative that established a single set of educational standards for kindergarten through 12th grade in English language arts and mathematics, at the Capitol in Jackson, Miss., Tuesday, Jan. 7, 2014. Opponents of Common Core hope to convince legislators into ending the initiative. Lawmakers return to the Capitol for a three-month session this year. (AP Photo/Rogelio V. Solis)
UNITED STATES - JUNE 10: From left, Sen. Elizabeth Warren, D-Mass., Sen. Chuck Schumer, D-N.Y., and Sen. Brian Schatz, D-Hawaii, participate in the press conference in the Capitol to call for the elimination of student loan debt at public higher education institutions on Wednesday, June 10, 2015. (Photo By Bill Clark/CQ Roll Call)
UNITED STATES - JUNE 10: From left, Sen. Chuck Schumer, D-N.Y., and Sen. Brian Schatz, D-Hawaii, participate in the press conference in the Capitol to call for the elimination of student loan debt at public higher education institutions on Wednesday, June 10, 2015. (Photo By Bill Clark/CQ Roll Call)
EXETER, NH - AUGUST 10: Democratic presidential candidate Hillary Clinton speaks at a town hall meeting at Exeter High School August 10, 2015 in Exeter, New Hampshire. Clinton discussed college affordability and student debt relief. (Photo by Darren McCollester/Getty Images)
UNITED STATES - MAY 19: Sen. Bernie Sanders, I-Vt., attends a news conference with members of the National Nurses Association at the Senate swamp on legislation 'to eliminate undergraduate tuition at public colleges and universities and to expand work-study programs,' May 19, 2015. (Photo By Tom Williams/CQ Roll Call)
US President Barack Obama applauds a speaker after his introduction before signing a memorandum on reducing the burden of student loans on June 9, 2014 in the East Room of the White House in Washington, DC. AFP PHOTO/Mandel NGAN (Photo credit should read MANDEL NGAN/AFP/Getty Images)
President Barack Obama meets with Tony Aguilar, Austin, Texas, right, of Student Loan Genius as he hosted top innovators and startup founders from across the country for the first White House Demo Day, Tuesday, Aug. 4, 2015, in the White House in Washington. Student Loan Genius allows companies to offer a benefit that optimizes employees’ student debt and provide a matching contribution to help them become debt-free faster. (AP Photo/Andrew Harnik)
Students wait outside Everest College, Tuesday, April, 28, 2015 in Industry, Calif., hoping to get their transcriptions and information on loan forgiveness and transferring credits to other schools. Corinthian Colleges shut down all of its remaining 28 ground campuses on Monday, April 27, displacing 16,000 students. The shutdown comes less than two weeks after the U.S. Department of Education announcing it was fining the for-profit institution $30 million for misrepresentation. (AP Photo/Christine Armario)
Details on Wall Street reform and student loans are seen in President Barack Obama's new $4 trillion budget plan that was sent to Congress today, on Capitol Hill in Washington, early Monday, Feb. 02, 2015. The fiscal blueprint, for the budget year that begins Oct. 1, seeks to raise taxes on wealthier Americans and corporations and use the extra income to lift the fortunes of families who have felt squeezed during tough economic times. Republicans, who now hold the power in Congress, are accusing the president of seeking to revert to tax-and-spend policies that will harm the economy while failing to do anything about soaring spending on government benefit programs. (AP Photo/J. Scott Applewhite)
Chart shows total student loan debt since 2005; 1c x 3 inches; 46.5 mm x 76 mm;
A close-up of President Barack Obama signing the bipartisan bill to cut student loan interest rates, Friday, Aug. 9, 2013, in the Oval Office of the White House in Washington. The bill has been awaiting Obama's signature since earlier this month, when the House gave it final congressional approval after a drawn-out process to reach a compromise in the Senate. The bill links student loan interest rates to the financial markets. It would offer lower rates for most students now, but higher ones down the line if the economy improves as expected. (AP Photo/Pablo Martinez Monsivais)
Illinois Senator Bill Cunningham receives testimony about reforming community college executive pay and other issues in the wake of questionable spending and severance practices at The College of DuPage Monday, July 20, 2015, in Chicago. The school has faced criticism over a $763,000 severance package to end president Robert Breuder's contract early. (AP Photo/Christian K. Lee)
Darius Gordon of Citizen Action of New York City leads a chant during a rally for public education on the Senate Staircase at the Capitol on Wednesday, March 11, 2015, in Albany, N.Y. Hundreds of public school students and parents rallied at the Capitol to urge lawmakers to boost school funding and reject Gov. Andrew Cuomo's education reforms. (AP Photo/Mike Groll)
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Industry website Retail Dive notes that younger people are more burdened by student loan debt, meaning that they are frugal during what should be their highest-spending years.

"It's slated to get worse as retailers find that millennials in their thirties are hampered by debt in what should be their highest-spending years," writes Daphne Howland at RetailDive.com.

Student debt could be part of the reason sales are contracting at department store retailers like Macy's, Sears, Nordstrom, and Kohl's. O'Shea told Bloomberg that off-price retailers like TJ Maxx are thriving because consumers have less money to spend on clothing.

See photos of America's favorite retailers

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America's favorite retailers
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America's favorite retailers
VANCOUVER, BC - SEPTEMBER 16: A general atmosphere view during the In-Store Opening Gala at Nordstrom Pacific Centre on September 16, 2015 in Vancouver, Canada. (Photo by Andrew Chin/Getty Images for Nordstrom)
Shoppers ride an escalator near a Nordstrom Inc. store at the Westfield San Francisco Shopping Centre in San Francisco, California, U.S., on Tuesday, May 12, 2015. Nordstrom Inc. is expected to release earnings figures on May 14. Photographer: David Paul Morris/Bloomberg via Getty Images
GLENDALE, CA - SEPTEMBER 17: Atmosphere during the Nordstrom store opening gala at The Americana at Brand on September 17, 2013 in Glendale, California. (Photo by Donato Sardella/Getty Images for Nordstrom)
Pedestrians walk past an Hennes & Mauritz AB (H&M) store in the Center City area of Philadelphia, Pennsylvania, U.S., on Saturday, March 21, 2015. The Bloomberg Consumer Comfort Index, a survey which measures attitudes about the economy, is scheduled to be released on March 26. Photographer: Charles Mostoller/Bloomberg via Getty Images
Shoppers look at clothing during the grand opening of the Hennes & Mauritz AB (H&M) flagship store in New York, U.S., on Thursday, July 17, 2014. At 57,000 square feet, the new flagship located at 589 Fifth Avenue is the worlds largest H&M store. Photographer: Victor J. Blue/Bloomberg via Getty Images
A shopper is reflected in the window of a Marshalls Plc store in San Francisco, California, U.S., on Tuesday, March 3, 2015. The Bloomberg Consumer Comfort Index, a survey which is measures attitudes about the economy, is scheduled to be released on March 5. Photographer: David Paul Morris/Bloomberg via Getty Images
Marshall's store sign
SOME OF THE MANY DRESSES at the Ross Dress for Less store in Pico Rivera shop on 11/14/75. (Photo by Gary Friedman/Los Angeles Times via Getty Images)
Ross Dress for Less sign in Thousand Oaks, CA
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Macy's same-store sales fell 7.4% in the most recent quarter, Nordstrom's fell 1.7%, and Kohl's dropped 3.9%. Shares of Macy's and Nordstrom have lost about 50% of their value in the last year, and Kohl's stock price has fallen 40%, notes Business Insider's Hayley Peterson.

Shopping visits made to off-price retail stores increased by 4% in the 12 months ending April 2016, compared to the same period last year.

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