Interest on the national debt

Before it spends a dollar on anything else, the government owes interest on what it has already borrowed. That bill now tops a trillion dollars a year.

The bill

In fiscal year 2026 (October through September), the Treasury's interest expense on the national debt came to $1.36 trillion — about $3.7 billion a day, or $4,000 for every person in the country. The year before, it was $1.22 trillion.

Source: U.S. Treasury, Interest Expense on the Public Debt Outstanding.

Gross vs. net interest

The Treasury's figure above is gross interest: it includes interest the Treasury credits to federal trust funds like Social Security — money the government is, in effect, paying itself. Net interest counts only what's paid to outside holders: investors, foreign buyers and the Federal Reserve. Net interest is smaller, but it's the part that's money actually leaving the government, and it has been climbing just as fast. In 2024, net interest passed the entire defense budget for the first time.

Why it's rising so fast

1. There's more debt. The debt has grown by more than $10 trillion since the start of 2022.
2. Rates went up. In 2020 and 2021, the Treasury could borrow for close to nothing — the average rate on all its debt fell below 2%. When inflation surged, interest rates rose sharply, and as old low-rate securities mature, they're replaced with new ones at today's higher rates. The average rate is now about 3.5%.

Because so much of the debt is short-term, changes in interest rates flow through to the government's costs within a few years. A one-percentage-point rise in the average rate on $40 trillion is about $400 billion a year in extra interest.

Why it matters

• It crowds out other things. Every dollar spent on interest is a dollar that can't go to roads, research, defense or tax cuts.
• It compounds. When the government runs a deficit, it's effectively borrowing to pay the interest — and then paying interest on that.
• It's hard to cut. Interest can't be trimmed in a budget deal; it's owed to whoever holds the debt.

On the other side of the ledger, interest payments are also income for the people and institutions that own Treasuries — including Americans' retirement accounts, banks and Social Security itself. See who owns the debt.