US Debt Interest Topped $1.27 Trillion This Year

Federal interest payments have risen above defense spending, impacting the national budget.

Updated on Sept. 18, 2026 in Inflation

US Debt Interest Topped $1.27 Trillion This Year

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Is the current trajectory of US national debt interest payments sustainable for the country's future?

The U.S. government paid $1.27 trillion in interest on its national debt during the first 11 months of fiscal year 2026. This figure marks a $139 billion increase compared to the same period in the prior fiscal year.

Why it matters

Rising interest costs now represent the second-largest line item in the federal budget, reflecting the fiscal impact of borrowing trillions during 2020 and 2021. As Treasury securities from lower-rate periods mature, they are being replaced by higher-yield debt, driving these costs upward.

Federal interest payments hit $1.27 trillion over the first 11 months of fiscal year 2026, surpassing the $876 billion spent on national defense. This reflects an increase of $139 billion, or 13%, over the previous year.

The players

Federal Reserve

The central bank of the United States that manages monetary policy and sets interest rates to influence borrowing costs and inflation.

Congressional Budget Office

A federal agency that provides nonpartisan economic and budgetary projections to help inform legislative decision-making.

The details

The increase in interest costs is largely due to the Federal Reserve raising interest rates since 2022 to combat inflation. As older Treasury securities issued during near-zero interest rate periods have matured, the government has replaced them with higher-yield bonds. With the total public debt currently sitting between $39 trillion and $40 trillion, these servicing costs continue to strain the federal budget.

2020-2021: Government borrowed trillions for pandemic relief programs.
2022: Federal Reserve began raising interest rates.
FY 2025: Net interest costs totaled $970 billion.
August 2026: Gross interest payments reached $97.7 billion.
2036: Annual interest costs are projected to reach $2.1 trillion.

Money Landscape

The current trajectory of federal interest payments follows a clear trend of rising costs fueled by a decade of increased borrowing and a higher interest rate environment. This trend is expected to persist, with projections suggesting annual costs could hit $2.1 trillion by 2036.

While these figures reflect government-level costs, the interest rate environment affects household borrowing for mortgages and credit cards. Households should consult a qualified financial professional to review how current interest rate cycles impact their personal debt and savings strategy.

The takeaway

The surge in federal interest payments highlights the significant cost of carrying $39 trillion in public debt during an era of higher interest rates. Households should track upcoming CBO budget updates to understand how these fiscal pressures might eventually influence tax or spending policy.