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

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.

“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.

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

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.

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.

NOW WATCH: This animated map shows the most probable path to a Trump victory

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at