The U.S. Federal Government expects to spend $910,000,000,000.00 on Debt Interest in 2025. This represents 13% of all Federal spending in 2025.
The national debt interest represents the cost of servicing the federal government’s outstanding debt. When the government borrows money to cover budget deficits, it issues Treasury securities, such as bonds, notes, and bills. Interest is paid to the holders of these securities, including individuals, corporations, foreign governments, and domestic entities. The total amount of interest the government pays depends on the size of the national debt and prevailing interest rates. As the national debt grows, interest payments constitute an increasingly significant portion of the federal budget, limiting resources for other programs.
The funding for national debt interest payments comes from general federal revenues, primarily collected through income taxes, corporate taxes, and other taxes. Unlike mandatory or discretionary spending programs, interest payments are legally obligated and must be paid regardless of other budgetary considerations. This means that servicing the debt is prioritized over most other federal expenditures, making it a non-negotiable financial obligation.
Interest on the national debt is classified as mandatory spending, but it differs from programs like Social Security or Medicare because it is determined solely by the size of the debt and interest rates, not by specific eligibility criteria or legislative appropriations. In fiscal year 2023, the federal government spent approximately $640 billion on interest payments, representing about 10 percent of total federal expenditures. Rising interest rates and the continued growth of the national debt are expected to push this figure higher in the coming years. Each year, the Congressional Budget Office (CBO) and the Office of Management and Budget (OMB) project interest costs as part of the federal budget process. These projections depend on assumptions about economic growth, inflation, and interest rate trends. Unlike discretionary programs, interest payments cannot be adjusted during the budget process, making them a fixed obligation that adds to the challenges of managing overall federal spending. Efforts to reduce interest costs typically focus on reducing the federal deficit and slowing the growth of the national debt through fiscal policy measures, such as increasing revenues or cutting spending in other areas.
