The U.S. federal government’s interest payments on national debt reached $1.36 trillion in fiscal 2026, averaging about $2.9 billion per day, according to Treasury Department data released this week. This marks an 8% increase from the previous fiscal year and places interest payments ahead of defense spending and Medicaid, highlighting a growing fiscal challenge.
The fiscal year ended last month with the federal budget deficit widening to $1.99 trillion, a 12% increase from fiscal 2025’s $1.78 trillion gap. Revenue rose 3% to $5.4 trillion, while spending increased 6% to $7.4 trillion. The average interest rate on the debt climbed to 3.53%, more than double the rate in 2021 before the Federal Reserve’s tightening cycle aimed at controlling inflation, Treasury data show.
Interest payments now exceed real GDP growth of about 2% and nominal GDP growth of roughly 6%, making them the fastest-growing portion of the federal budget. The Peter G. Peterson Foundation noted these payments represent 3.2% of GDP, breaking the previous record set in 1991. With gross U.S. debt at $40 trillion and publicly held debt equal to 100% of GDP, rising borrowing costs are intensifying the debt burden.
Net interest payments for fiscal 2026 totaled $1.05 trillion, surpassing increases in overall spending, revenue, and GDP growth rates. This trend signals that interest costs will continue to dominate federal expenditures, posing significant fiscal management challenges in the near term, according to Treasury Department figures.