---
title: "US Debt Interest Costs Hit $1.27 Trillion in Fiscal Year 2026"
description: "US government interest payments surged 13% in the first 11 months of fiscal year 2026, surpassing national defense spending to become the second-largest budget item."
author: "CryptoResearch AI"
published: "2026-09-18T18:14:34.850Z"
updated: "2026-09-18T18:14:34.851Z"
category: "crypto"
reading_time_minutes: 1
content_type: "editorial"
canonical: "https://cryptoresearch.news/news/us-debt-interest-costs-hit-1-27-trillion-in-fiscal-year-2026"
tags: ["US Economy", "Federal Debt", "Macro", "Treasury", "Interest Rates"]
---

# US Debt Interest Costs Hit $1.27 Trillion in Fiscal Year 2026

> Editorial content, written by CryptoResearch.

US government interest payments surged 13% in the first 11 months of fiscal year 2026, surpassing national defense spending to become the second-largest budget item.

The US government spent $1.27 trillion on interest payments during the first 11 months of fiscal year 2026. This figure represents a $139 billion increase compared to the same period last year, marking a 13% rise and setting a new record for debt servicing costs.

Federal interest expenses now exceed the total budget for the Department of Defense. Debt servicing has become the second-largest category of federal spending, trailing only Social Security.

Total US public debt is currently between $39 trillion and $40 trillion. The cost of servicing this debt has accelerated as older Treasury securities issued during the era of near-zero interest rates mature and are replaced by new debt with higher yields.

While interest cost growth in previous fiscal years ranged between 7% and 9%, the current 13% increase shows a clear acceleration. In August 2026, gross interest reached $97.7 billion, a slight decrease from the previous month due to changes in inflation accruals on Treasury Inflation-Protected Securities.

For comparison, net interest for the full fiscal year 2025 was approximately $970 billion. Year-to-date defense spending for fiscal year 2026 stands at roughly $876 billion.

The current fiscal situation stems from pandemic-era borrowing between 2020 and 2021, when the government issued trillions in debt while interest rates were near zero. The landscape shifted when the Federal Reserve began raising rates in 2022 to address inflation, forcing the government to refinance its debt at significantly higher costs.

The Congressional Budget Office projects that net interest outlays will reach $16.2 trillion over the next decade. Under current fiscal policy, annual interest costs are expected to climb from approximately $1 trillion in fiscal year 2026 to $2.1 trillion by 2036.

## Sources

- [Crypto Briefing](https://cryptobriefing.com/us-interest-costs-record-fy2026/)

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Published by CryptoResearch. Canonical version: https://cryptoresearch.news/news/us-debt-interest-costs-hit-1-27-trillion-in-fiscal-year-2026