The federal government spent $1.360 trillion on interest in fiscal 2026, according to the Treasury Department’s closing accounting for the year, the largest annual interest bill in United States history. The figure covers the twelve months ended September 30, 2026, and exceeds the $1.220 trillion recorded in fiscal 2025 by $140.4 billion, an increase of 11.5%. Treasury’s interest expense dataset splits the total into $1.068 trillion owed to holders of publicly traded securities and $291.9 billion credited to federal trust funds. The increase landed even though the Federal Reserve left its policy rate near 3.63% for most of the fiscal year before raising it in September. Interest costs rose mainly because Treasury kept replacing maturing low-coupon securities with new ones sold at current yields, a process that continues no matter which direction the Fed moves next. With total debt outstanding above $40.3 trillion and the ten-year yield above 5%, that refinancing arithmetic points higher again in fiscal 2027. Our interest on the national debt tracker and current national debt page follow both figures as Treasury updates them.
- Federal interest expense totaled $1.360 trillion in fiscal 2026, up $140.4 billion from fiscal 2025.
- Treasury note interest rose $73.9 billion to $507.7 billion, the largest single component.
- Treasury bill interest fell $17.6 billion to $254.1 billion, the only major line to decline.
- The average rate on all interest-bearing debt reached 3.531% on September 30, 2026.
- Total debt outstanding stood at $40.305 trillion on October 8, 2026.
What the Fiscal 2026 Books Show
Treasury closes its interest expense ledger on the last day of each fiscal year, and the September 30, 2026 entry is now final. Total interest expense came to $1,360,396,866,366, or $1.360 trillion. That is the third consecutive fiscal year above $1.1 trillion and the first above $1.3 trillion. Fiscal 2025 closed at $1.220 trillion and fiscal 2024 at $1.133 trillion, so the government has added $227 billion to its annual interest bill in two years. The dollar increase in fiscal 2026 was $140.4 billion, larger than the $87.0 billion added the year before.
The reported total is broader than the net interest line that appears in deficit coverage. Treasury’s figure counts $1.068 trillion of interest on securities held by the public and $291.9 billion credited to government account series holdings, the Treasury securities held inside Social Security, Medicare and federal retirement trust funds. Those trust fund credits are an internal transfer and do not require Treasury to raise cash from investors. The $1.068 trillion owed on publicly held securities is the portion that must be funded through tax receipts or new borrowing, and it is the number that competes directly with other federal spending.
Note Costs Drove the Increase as Bill Costs Fell
Treasury notes, the two year through ten year securities that make up the largest block of marketable debt, accounted for nearly all of the increase. Interest on notes totaled $507.7 billion in fiscal 2026, up $73.9 billion from $433.8 billion a year earlier. Treasury bonds added $21.0 billion to reach $179.8 billion. Trust fund interest payments rose $17.4 billion to $210.1 billion. Treasury bills moved the other way: bill interest fell $17.6 billion to $254.1 billion, the only major component to decline.
The split reflects two different mechanisms. Bill costs track the front end of the curve, which drifted lower through the middle of the fiscal year while the Fed held its policy rate steady, and the three month yield finished at 4.23% on October 8. Note and bond costs instead reflect the coupons locked in at issuance. Securities sold in 2019 through 2021 at coupons near 1% are maturing now and being replaced at auction yields above 4.9%. Treasury sold three year notes at 4.932% on October 6, ten year notes at 5.300% on October 7 and thirty year bonds at 5.618% on October 8. Every one of those auctions raises the weighted average coupon Treasury carries into fiscal 2027.
Why the Average Rate on the Debt Keeps Climbing
Treasury publishes the average interest rate it pays across every outstanding security each month. On September 30, 2026 the average rate on all interest-bearing debt was 3.531%, and the average on marketable debt alone was 3.518%. Those averages sit far below current auction results, which is the whole reason interest costs keep rising. Roughly a third of marketable debt matures within a year, so a large share of the stock reprices annually toward prevailing yields rather than the coupons it carries today.
The component averages show how far the repricing still has to run. Treasury bills averaged 3.870% on September 30, notes 3.383% and bonds 3.466%, while floating rate notes averaged 4.141%. Market yields on October 8 stood at 4.23% for three month bills, 4.75% for two year notes, 5.22% for ten year notes and 5.60% for thirty year bonds. As long as auction yields exceed the average coupon on maturing paper, the blended rate rises mechanically. Total debt outstanding reached $40.305 trillion on October 8, with $32.454 trillion held by the public and $7.851 trillion held intragovernmentally, so each tenth of a percentage point on the average rate is worth roughly $40 billion a year.
What Rising Interest Costs Mean for Your Money
Federal interest costs do not set consumer rates directly, but they share the same inputs. The prime rate, which banks use to price credit cards, home equity lines and many small business loans, sits at 7.00% after the Federal Reserve raised its target range in September. Prime moves with the federal funds rate, which averaged 3.75% in September. Treasury yields drive the other half of household borrowing costs: thirty year mortgage pricing tracks the ten year yield, which closed at 5.22% on October 8. Our current prime rate page and current mortgage rates page update as those inputs move.
The practical read for households is that the same high-yield environment raising Treasury’s costs is also raising what savers earn and what borrowers pay. Heavy Treasury issuance at yields above 5% gives banks and money funds a competitive benchmark, which supports deposit pricing; the top accounts on our high-yield savings list reflect that. The same yields keep mortgage and auto financing expensive. Nothing in the fiscal 2026 interest figure obliges the Federal Open Market Committee to act, and the Committee next meets on October 27 and 28. But the data confirms that the elevated-rate period has already been locked into Treasury’s books for years through the coupons sold during it.
Track the monthly average interest rate release on Treasury’s Fiscal Data site rather than the headline debt total. The debt figure moves daily on cash management and tells you little about cost. The average rate moves once a month and is the single number that determines what the stock of debt costs to carry. When the average rate rises while the debt total is flat, refinancing is doing the work, and that is the pattern that has held every month of fiscal 2026. Compare it against the latest auction yields to see how much repricing is still ahead.
Frequently Asked Questions
How much does the U.S. pay in interest on the national debt?
The United States paid $1.360 trillion in interest during fiscal 2026, the twelve months ended September 30, 2026, according to Treasury’s final accounting. That is a record, and it is $140.4 billion more than the $1.220 trillion paid in fiscal 2025, an increase of 11.5%.
How big is the national debt right now?
Total public debt outstanding was $40.305 trillion on October 8, 2026, the most recent business day in Treasury’s Debt to the Penny series. Of that, $32.454 trillion was held by the public, meaning investors, foreign governments, banks and the Federal Reserve, and $7.851 trillion was held intragovernmentally inside federal trust funds. The total rose about $21 billion between October 7 and October 8 alone, though daily moves largely reflect cash management and settlement timing rather than new deficit spending.
Why did Treasury bill interest costs fall while note costs rose?
Bills mature in a year or less, so their interest cost tracks short-term yields almost immediately. Short yields drifted lower through much of fiscal 2026 while the Federal Reserve held its policy rate steady, which cut bill interest by $17.6 billion to $254.1 billion. Notes and bonds work differently. Their cost is fixed at the coupon set when they were issued, so the increase shows up only as older low-coupon securities mature and get replaced. Note interest rose $73.9 billion on that replacement effect alone.
Does federal interest spending affect my credit card or loan rate?
Not directly. Your credit card rate is tied to the prime rate, currently 7.00%, which moves only when the Federal Reserve changes its target range. Federal interest costs have no mechanical link to that decision. The connection runs the other way: both your rate and Treasury’s costs respond to the same underlying yields. When Treasury has to sell ten year notes at 5.30%, as it did on October 7, that same yield level is what makes mortgages and other long-dated consumer credit expensive.
Will federal interest costs keep rising in fiscal 2027?
The arithmetic strongly favors another increase. The average rate Treasury pays across all interest-bearing debt was 3.531% on September 30, while recent auctions cleared between 4.93% and 5.62%. Every maturing security replaced at those levels lifts the blended rate. A larger debt stock compounds the effect, and the total has already reached $40.305 trillion. A sustained drop in market yields would slow the increase, but it would not reverse the coupons already locked in on notes and bonds sold during fiscal 2026.
What should borrowers and savers do with the prime rate at 7.00%?
Treat the current level as the working assumption rather than a peak to wait out. Variable-rate balances tied to prime, including credit cards and home equity lines, cost more than fixed alternatives at 7.00%, so paying those down first is the clearest win. Savers have the opposite opportunity: deposit yields are competitive while Treasury is issuing above 5%, and locking a term now protects that rate if the Federal Reserve eventually reverses course. Check where your current accounts sit against the best available offers.
Watching the Fiscal 2027 Interest Bill
Three releases will shape the next reading. Treasury’s monthly average interest rate update is the cleanest early signal, the Monthly Treasury Statement adds the receipts side, and the Federal Open Market Committee meets October 27 and 28. For continuous tracking, the Fed rate forecast for 2026, the Treasury yield curve page and the debt to GDP ratio page carry the figures as they update.
References
- U.S. Department of the Treasury, Fiscal Data. “Interest Expense on the Public Debt Outstanding.” Fiscal year 2026 final, record date September 30, 2026. fiscaldata.treasury.gov
- U.S. Department of the Treasury, Fiscal Data. “Average Interest Rates on U.S. Treasury Securities.” Record date September 30, 2026. fiscaldata.treasury.gov
- U.S. Department of the Treasury, Fiscal Data. “Debt to the Penny.” Record date October 8, 2026. fiscaldata.treasury.gov
- U.S. Department of the Treasury, Fiscal Data. “Auctions Query.” Auction results dated October 6, 7 and 8, 2026. fiscaldata.treasury.gov
- Federal Reserve Bank of St. Louis, FRED. “Bank Prime Loan Rate (DPRIME).” fred.stlouisfed.org
- Federal Reserve Bank of St. Louis, FRED. “Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity (DGS10).” fred.stlouisfed.org
- Board of Governors of the Federal Reserve System. “Calendar: October 2026.” federalreserve.gov
