What does the Congressional Budget Office forecast for U.S. net interest payments through 2030 and what assumptions drive that forecast?
Executive summary
The Congressional Budget Office’s January 2025 outlook shows net interest payments climbing substantially over the remainder of the decade and — under its baseline — beginning in 2030 to exceed their prior historical peak; that rise reflects both larger debt outstanding and a higher path for interest rates than CBO assumed a year earlier [1] [2] [3]. The forecast ties the increase to two mechanics: projected increases in interest rates on Treasury securities and growth in debt held by the public driven by persistent deficits and rising mandatory spending [4] [5].
1. What the CBO actually projects through 2030: rising interest costs that crest beyond prior peaks
CBO’s Budget and Economic Outlook projects net outlays for interest will grow substantially through the 2020s and that, beginning in 2030, net interest costs exceed their previous peak — a milestone CBO highlights repeatedly as debt and rates rise [1] [6]. In CBO’s recent publications the agency reports that net interest as a share of GDP is projected to increase across the decade (with CBO estimates placing net interest near or above roughly 2–2.6 percent of GDP by 2030 depending on the specific publication and baseline vintage) and that dollar outlays have already passed $1 trillion in FY2025 and will continue upward under baseline assumptions [4] [5] [7].
2. The numerical drivers: higher interest-rate forecasts and more debt
CBO explicitly attributes upward revisions in projected net interest outlays to changes in its forecast of interest rates and to the amount of debt the Treasury must issue to finance persistent deficits; the agency quantifies one change as an increase of roughly $205 billion in projected net interest over the 2025–2034 period attributable to revised interest-rate forecasts [3] [8]. The agency’s economic forecast shows longer-term interest rates declining through 2026 and then remaining roughly flat, while short- and long-term rates are higher on average than in previous forecasts — an input that raises projected debt service costs [2] [9].
3. Debt dynamics that amplify interest costs: deficits and mandatory spending
CBO’s baseline links rising net interest payments to growing debt held by the public — which CBO projects will reach roughly 109 percent of GDP by 2030 in some of its analyses — and to continued primary deficits driven by growth in Social Security and Medicare outlays and other mandatory spending [4] [5]. Those structural spending pressures mean more debt issuance; when coupled with CBO’s interest-rate path, that higher debt stock multiplies into larger net interest outlays over time [1] [4].
4. What assumptions matter most: interest rates, fiscal policy, and foreign holdings
The single biggest sensitivity in CBO’s net-interest forecast is the assumed path of market interest rates on Treasury securities; the agency’s baseline uses its economic forecast for rates (for example, a multi-year average for the 10‑year Treasury that CBO projects to decline through 2026 and then remain near that level through 2030), and upward revisions to that path materially increase projected interest costs [2] [9] [3]. Secondary but important assumptions include the evolution of primary deficits (which depend on tax revenue and mandatory spending), and the composition of holders of U.S. debt (since foreign holdings affect net international income and have complex feedbacks on rates) [10] [8].
5. Alternatives and the range of plausible outcomes
Outside analysts and alternative baselines produce notably higher interest-cost paths: for example, the Committee for a Responsible Federal Budget’s August 2025 baseline estimates interest payments rising to $1.8 trillion by 2035 and presents scenarios in which interest payments hit $1.5 trillion by 2030 if yields remain higher than CBO assumes [11] [7]. CBO itself shows much larger numbers in extended projections when interest rates and deficits follow less favorable paths, underscoring that the 10‑year baseline is highly sensitive to changing economic and policy conditions [4] [8].
6. Bottom line and policy implication emphasized by CBO
CBO’s forecast through 2030 is unambiguous in direction if not in a single fixed number: net interest payments will rise materially, surpass past peaks around 2030 under the baseline, and that outcome is driven primarily by higher projected interest rates and an expanding stock of public debt resulting from persistent deficits and growing mandatory spending [1] [3] [4]. Because those elements are also policy-sensitive, CBO presents the baseline as a tool for highlighting risks and tradeoffs rather than as an immutable destiny [8].