The cost of servicing the US national debt interest has climbed to nearly $970 billion annually, underscoring a sharp fiscal shift that has accelerated since 2020. According to a recent analysis by the Committee for a Responsible Federal Budget, interest payments on the $38.8 trillion debt have nearly tripled in five years and now exceed federal spending on both national defense and Medicaid.
The scale of US national debt interest reflects a combination of mounting borrowing and higher interest rates. After pandemic-era stimulus pushed federal borrowing to historic levels, the Federal Reserve’s subsequent rate hikes significantly increased the cost of financing that debt. As a result, interest costs have risen from 1.6 percent of gross domestic product in 2021 to 3.2 percent in 2025, the highest share on record.
From Pandemic Borrowing to Rate Shock
The debt burden expanded rapidly during and after the COVID-19 crisis, when Congress authorized trillions of dollars in relief spending. At the same time, interest rates hovered near zero, keeping borrowing costs manageable.
That dynamic changed as inflation surged and the Federal Reserve tightened monetary policy. Higher benchmark rates filtered through Treasury markets, lifting yields on government securities. With more debt outstanding and new borrowing occurring at higher rates, total interest payments surged.
The result is a federal budget where debt service now commands more resources than politically sensitive programs such as Medicaid and the Pentagon’s annual budget. Yet unlike those categories, interest payments do not directly fund services or benefits. They represent contractual obligations to creditors, including domestic investors, pension funds, and foreign governments.
The $2 Trillion Threshold on the Horizon
Projections suggest the pressure will intensify. The Congressional Budget Office estimates that net interest costs will more than double over the next decade, reaching approximately $2.1 trillion by 2036.
Over that same period, debt held by the public is expected to grow by roughly 86 percent, adding about $26 trillion. Even a modest additional increase in the average interest rate, projected at about half a percentage point, would amplify the overall burden. Combined, those factors would drive interest costs up by more than 120 percent.
By 2036, interest payments are projected to consume roughly one-quarter of all federal revenue. That marks a significant shift from recent years, when interest accounted for about one-fifth of revenues, and from 2021, when it absorbed closer to one-tenth.
Put differently, for every four dollars the federal government collects in taxes, one could go toward paying creditors rather than funding public services or investments.
When Interest Overtakes Medicare
Currently, interest spending is roughly on par with Medicare, one of the federal government’s largest and most politically entrenched programs. The Congressional Budget Office projects that by 2029, interest costs will surpass Medicare, becoming the second-largest federal expenditure after Social Security.
Looking further ahead, projections indicate that by 2047, interest payments could exceed even Social Security outlays, making debt service the single largest item in the federal budget.
Such a shift would represent a fundamental reordering of federal priorities. Unlike entitlement programs or defense spending, interest payments offer little policy flexibility in the short term. They are determined by past borrowing decisions and prevailing market rates.
A Crowding-Out Effect
Fiscal analysts warn that rising interest costs could constrain future policy choices. The Committee for a Responsible Federal Budget projects that over the next decade, nearly 28 percent of nominal federal spending growth will be attributable to rising interest payments. As a share of GDP, interest could account for more than the entirety of projected spending growth, implying relative contraction in other areas.
The national debt stood at approximately $38.77 trillion in February and has been expanding at a pace of more than $6 billion per day. At that rate, total debt would cross the $39 trillion mark within months.
Absent a credible deficit reduction strategy, higher debt levels and sustained interest rates could reinforce one another, placing additional upward pressure on borrowing costs. Budget watchdogs argue that stabilizing debt as a share of GDP would ease long-term interest pressures and reduce the risk that debt service overwhelms federal finances.
For now, however, US national debt interest remains one of the fastest-growing components of the federal budget, reshaping fiscal priorities and narrowing the government’s room to maneuver in the decade ahead.
