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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2016 issues: Education politics, student loans, common core
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2016 issues: Education politics, student loans, common core
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)
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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.

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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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