US interest costs hit $1 trillion as debt snowball risk grows

The US interest bill has reached a record $1 trillion, putting the cost of past borrowing at the centre of the country’s fiscal position. Total federal debt stood at $34.0 trillion as of 30 April 2025.

America’s national debt has been rising for decades. The immediate concern is that rising interest costs could create a debt snowball effect. Higher borrowing costs increase the expense of servicing existing debt, while further borrowing to meet those costs can add to the debt burden.

The scale of the figures is uneven across measures of interest expense. US federal net interest expense was $2.6 trillion in fiscal year 2023. It accounted for 3.1% of GDP in that fiscal year, while gross federal interest expense was 6.7% of GDP.

Federal gross debt was 121.2% of GDP in 2024. Federal gross debt held by the public was projected at 102.0% of GDP in fiscal year 2024.

Rates have made refinancing more expensive. US 10-year Treasury yields averaged 4.17% in 2024, while 3-month Treasury bill yields averaged 5.33%. For the coming fiscal year cycle, 31.2% of US federal debt was due within 1 year.

That maturity profile leaves a substantial share of the debt exposed when securities come due and must be replaced at prevailing rates. The government’s ability to manage its interest bill will therefore depend in part on where Treasury yields go from here.

Baseline assumptions projected $1.6 trillion in US federal interest outlays for 2024. Under CBO’s baseline assumptions, net interest outlays are projected to reach $1.7 trillion by 2034.

The wider budget position remains strained. The US federal budget deficit for 2026 is $1.992 trillion. In a survey of economists, 42% expected concerns over the sustainability of US federal debt to worsen under current policy settings by 2026.

The figures set out the pressure clearly. What remains unknown is whether policy changes, revenue measures or lower borrowing costs will interrupt the cycle before interest payments take a larger place in federal spending.