How Much Does the US Pay in Interest on National Debt?

Zach Hill · February 28, 2026

Last Updated: February 2026

In fiscal year 2024, the United States paid $1.13 trillion in gross interest on the national debt — making interest the single fastest-growing category of federal spending. For context, that is more than the entire defense budget ($886 billion), more than Medicare ($874 billion), and more than the government spends on veterans, education, transportation, and science combined.

The national debt is not just a number on a clock. It generates a very real annual cost that must be paid before anything else — and that cost is now consuming a larger share of the federal budget than at any point in modern history.

Key Numbers at a Glance

Gross Interest vs. Net Interest: What's the Difference?

You will see two different interest figures reported — gross interest and net interest. Understanding the difference is important:

• Gross interest ($1.13T): The total interest paid on all outstanding federal debt, including payments on intragovernmental holdings (money the government owes to itself, like the Social Security Trust Fund)
• Net interest ($882B): Interest paid only to external holders — investors, foreign governments, the Federal Reserve, banks, and individuals. This excludes intragovernmental transfers

The CBO and most budget analysts focus on net interest because it represents the actual cash outflow from the government to external creditors. However, gross interest is the more complete picture of the government's total interest burden.

How Did Interest Payments Get So High?

Interest on the national debt is a function of two variables: how much we owe and the interest rate we pay on it. Both have moved dramatically in recent years.

The Debt Has Exploded

The total national debt has grown from $10 trillion in 2008 to over $40 trillion in 2026 — a 260% increase in just 18 years. Even at low interest rates, paying interest on $40 trillion is an enormous sum. Key drivers include:

• The 2008 financial crisis and Great Recession stimulus ($5+ trillion added)
• The 2017 Tax Cuts and Jobs Act (reduced revenue by an estimated $1.5-2 trillion over 10 years)
• COVID-19 pandemic spending ($5+ trillion in relief and stimulus)
• Persistent structural deficits of $1-2 trillion annually

Interest Rates Rose Sharply

From 2009 to 2021, the Federal Reserve held interest rates near zero — which kept borrowing costs artificially low. The average interest rate on outstanding federal debt dropped to approximately 1.6% in 2021, its lowest level on record.

Then inflation surged, and the Fed responded with the most aggressive rate-hiking cycle in 40 years — raising the federal funds rate from 0% to 5.25-5.50% between March 2022 and July 2023. As existing debt matures and is refinanced at higher rates, the average interest rate on outstanding debt has climbed steadily:

Sources: U.S. Treasury, Congressional Budget Office, Office of Management and Budget.

The critical problem: even a modest increase in the average interest rate, applied to $40+ trillion in debt, produces hundreds of billions in additional annual costs. Each 1 percentage point increase in the average rate adds approximately $360 billion per year in interest expense.

Interest Payments Compared to Other Federal Spending

To understand the scale of interest payments, compare them to other major categories of federal spending:

The most alarming comparison: interest payments now exceed national defense spending. The federal government spends more servicing past borrowing than it does protecting the nation. This is a historically unprecedented situation — and it is projected to get worse. For a broader view of where federal money goes, see our guide to government spending.

The Interest-Deficit Doom Loop

Perhaps the most concerning aspect of rising interest costs is the self-reinforcing cycle they create:

1. The government runs a deficit (spends more than it collects)
2. To cover the deficit, it borrows more money by issuing new debt
3. The new debt generates additional interest obligations
4. The additional interest costs increase the deficit
5. The larger deficit requires more borrowing
6. Repeat

This is what economists call a "debt spiral" or "doom loop." When interest costs grow faster than the economy, the debt becomes mathematically unsustainable without either significant spending cuts, tax increases, or some combination of both.

The CBO projects that net interest will grow from $882 billion in 2024 to $1.7 trillion by 2034 — even assuming no new recessions, wars, or other fiscal shocks. Under less favorable assumptions, the figure could be significantly higher.

How Much Interest Does the US Pay Per Second?

At the current annualized rate of approximately $1.1 trillion in gross interest:

• Per year: $1,100,000,000,000
• Per month: $91.7 billion
• Per day: $3.01 billion
• Per hour: $125.6 million
• Per minute: $2.09 million
• Per second: $34,850

That means in the time it takes you to read this sentence — about 5 seconds — the federal government paid roughly $174,000 in interest. Track the real-time pace on our live debt page.

Historical Perspective: Interest Payments Over Time

Interest on the national debt has been a budget item since the nation's founding, but its magnitude has varied dramatically:

Interest as a percentage of GDP reached a previous peak of 3.2% in 1991 during the savings-and-loan crisis era. It then declined steadily as falling interest rates more than offset rising debt levels. Today, at approximately 3.1% of GDP and rising rapidly, we are approaching territory not seen in 35 years — with a much larger debt base underneath.

What Happens If Interest Rates Stay High — or Rise Further?

The biggest fiscal risk facing the United States is not the debt itself — it is the interest rate on that debt. Here is how different rate scenarios would affect annual interest costs:

Even in the "rates fall" scenario, interest costs remain enormous because the underlying debt is so large. And if rates rise due to a debt default scare, loss of reserve currency confidence, or persistent inflation, interest costs could consume a third or more of all federal revenue — leaving less money for everything else the government does.

Where Does the Interest Money Go?

Interest payments flow to whoever holds Treasury securities. Based on the current ownership breakdown:

• Foreign governments and investors (~23.5%): Approximately $260 billion per year flows to foreign holders. Japan, China, and the UK are the largest recipients
• Federal Reserve (~12.7%): The Fed received approximately $140 billion in interest — but remits most profits back to the Treasury, so the net cost is minimal
• Mutual funds, pension funds, banks (~20%): Approximately $220 billion flows to domestic institutional investors — and ultimately to American retirees, savers, and shareholders
• Intragovernmental holdings (~21%): Approximately $230 billion is paid to trust funds like Social Security — interest the government pays to itself
• Individual investors and others (~23%): Approximately $250 billion goes to individual Americans and other holders

An important nuance: interest paid to domestic holders largely stays in the U.S. economy. Interest paid to foreign holders represents a real transfer of wealth abroad.

CBO Projections: Interest Will Surpass Defense and Medicare

The Congressional Budget Office's latest projections show net interest payments continuing to grow rapidly:

By 2034, the CBO projects net interest will consume 4.1% of GDP — a level never before seen in American history. At that point, interest alone would exceed the combined spending on national defense, veterans, education, and transportation.

What Can Be Done About Rising Interest Costs?

Reducing interest costs requires addressing both components — the debt level and the interest rate:

Reduce the Deficit

Every dollar of deficit adds to the debt, which generates future interest costs. The DOGE Clock tracks efficiency initiatives and other spending reform efforts that aim to reduce wasteful spending. But achieving meaningful deficit reduction requires addressing the major drivers: Social Security, Medicare, defense, and tax policy.

Grow the Economy

Faster economic growth increases tax revenue without raising rates, helping to close the deficit gap. However, sustained real GDP growth above 3% has proved elusive in the 21st century.

Manage Debt Maturity

The Treasury can reduce near-term interest costs by issuing more short-term debt (which typically carries lower rates) or locking in lower rates by issuing more long-term bonds when rates are favorable. This is a Treasury management decision that affects the timing but not the total cost of interest.

Hope for Lower Rates

If the Federal Reserve cuts rates due to slowing inflation or economic weakness, the cost of newly issued debt will fall. However, existing fixed-rate bonds continue to carry their original rates until maturity, so the average rate on outstanding debt adjusts slowly.

Frequently Asked Questions

How much does the US pay in interest on the national debt per day?

As of 2026, the U.S. pays approximately $3.0-3.3 billion per day in gross interest on the national debt. That works out to roughly $125 million per hour or $2.1 million per minute.

Is interest on the national debt the largest budget item?

Not yet, but it is rapidly approaching that status. Social Security remains the largest single budget item at $1.46 trillion per year. Net interest ($882 billion in FY2024) has already surpassed defense spending ($886 billion when comparing net interest to defense) and is on track to become the second-largest budget item by 2026, potentially rivaling Social Security by the early 2030s if current trends continue.

What would happen if the US stopped paying interest?

Failing to pay interest on Treasury securities would constitute a debt default — the most severe fiscal crisis possible. It would crash financial markets, spike borrowing costs for the government and consumers, threaten the dollar's reserve currency status, and trigger a global recession. The U.S. has never missed an interest payment on its sovereign debt.

Does the Federal Reserve profit from interest on the national debt?

The Federal Reserve receives interest on the Treasury securities it holds (approximately $4.6 trillion). However, the Fed remits its net earnings — including most interest income — back to the U.S. Treasury. In normal years, this "remittance" returns $50-100 billion annually. Since 2022, however, the Fed has been operating at a loss due to paying high rates on bank reserves, so remittances have been suspended and a "deferred asset" has accumulated.

How much interest does the US pay to China?

China holds approximately $759 billion in U.S. Treasuries. At an average yield of roughly 3.5%, China receives approximately $26-27 billion per year in interest payments from the U.S. government. This has been declining as China has reduced its holdings. Japan, as the larger holder ($1.08 trillion), receives approximately $38 billion.

The Bottom Line

Interest on the national debt has crossed a critical threshold. At over $1 trillion per year and growing, it now consumes more federal revenue than any category except Social Security — and it is on track to keep growing regardless of any realistic policy changes in the near term.

The compounding effect of paying interest on a $40 trillion debt at modern interest rates creates a fiscal burden that constrains every other government priority. Every dollar spent on interest is a dollar not available for infrastructure, education, defense, healthcare, or tax relief.

Understanding this dynamic is essential for evaluating any policy proposal — because the interest bill will be there no matter what. Track the real-time cost on our US Debt Clock.

Related Resources

• US Debt Clock — Real-time national debt tracker
• Live Debt Tracking — Watch debt and interest grow in real-time
• Debt-to-GDP Ratio Explained — Context for fiscal sustainability
• Who Owns US Debt — Where interest payments flow
• Government Spending Guide — Full federal budget breakdown
• DOGE Claims Tracker — Self-reported cuts vs independent analysis
• Debt Calculator — Calculate your share
• Debt Glossary — Key financial terms

Data sources: U.S. Treasury Department (Interest Expense on the Debt Outstanding), Congressional Budget Office (Budget & Economic Outlook), Office of Management and Budget (Historical Tables), Federal Reserve. Updated February 2026.