Q:

What is the typical interest rate on national debt?

A:

Quick Answer

The typical interest on the national debt is between 4 and 6 percent, as of 2016. The historic interest rate of 2- and 10-year government bonds was between 4.75 and 5.25 percent before the recession in 2008, as indicated on TreasuryDirect.com.

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Full Answer

Rates for these bonds are now between 0.5 and 2.5 percent, roughly half of their normal levels. The interest paid for the fiscal year 2014 was $430.8 billion, and it was $402 billion for 2015. This would have been around $900 billion each year had interest rates been at their normal levels. Normal interest rates would also double the national debt.

The Federal Reserve has suppressed interest rates prior to 2016 and bought trillions in government bonds, on which it repays interest to the Treasury. For 2014, the Federal Reserve paid $98 billion in interest, as outlined on Forbes.com. In essence, the government was borrowing trillions of dollars from itself. Forbes predicted in February 2015 that the size of the national debt should keep interest rates low for the foreseeable future, explains Forbes. The 2016 projection for 10-year Treasury notes was 2.25 percent.

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