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As of January 2025, the U.S. national debt had reached $36.1 trillion — the amount the government owes to its creditors. About 80% of U.S. national debt is owned by foreign governments like Japan, China, and the U.K., as well as businesses and individual investors. The rest is intragovernmental debt.
The United States borrows money typically by issuing Treasury securities, such as bills, notes, and bonds to these various entities — who loan the U.S. the funds it needs for various operations.
While there are different viewpoints on the extent to which the national debt may impact individual investors, many investors are aware that the total amount of national debt, and the government’s ability to manage its payments, can impact interest rates, bond yields, and more.
Key Points
• The U.S., like many governments, issues bonds to help fund various government programs, and close the gap between revenues and expenses.
• The national debt stands at about $36.1 trillion, as of July 2025, which is the current amount of the U.S. debt ceiling.
• Some 80% of U.S. debt is held by countries including Japan, China, as well as businesses and individual investors. The remainder are funds the government loans itself.
• U.S. national debt is about 122% of the country’s gross domestic product (GDP), one of the highest in the world.
• The U.S. has yet to default on its debt obligations, and it’s expected that the national debt ceiling will be extended this year.
How Much Debt Does the US Have?
The amount of debt taken on by the U.S. government over time has grown precipitously. In the 100 years between 1924 and 2024, the national debt grew from $365 billion to $35.46 trillion.
Each year that the United States cannot pay the deficit between its revenue and expenses, the national debt grows. As of July 2025, the U.S. had once again reached its debt ceiling — roughly $36.1 trillion — which is the maximum amount the government can legally borrow.
It’s anticipated that Congress will once again raise the debt ceiling later this year, so that the U.S. does not default on its debt obligations, which could have severe market impacts worldwide.
The U.S. national debt comes from Treasury securities issued to foreign governments, as well as intergovernmental loans, in addition to those sold to businesses and individuals. These include Treasury bills, notes, bonds, floating-rate notes, and Treasury Inflation Protected Securities (or TIPS).
Because the U.S. has never defaulted on its debts, many people anticipate that the government’s ability to borrow will be extended at some point in 2025.
Who Is the US in Debt to?
There are generally two categories of debt: intragovernmental holdings and debt from the public. The debt that the government owes itself is known as intragovernmental debt. In general, this debt is owed to other government agencies such as the Social Security Trust Fund and other programs.
Because the Social Security Trust Fund doesn’t use all its capital, for example, it invests the excess funds in U.S. Treasuries — effectively loaning other parts of the government its cash. If the Social Security Trust Fund needs money, it can redeem the Treasuries.
The public debt consists of debt owned by individuals, businesses, governments, and foreign countries. Foreign countries own roughly one-third of U.S. public debt, with Japan owning the largest chunk of American debt hovering around $1.1 trillion. US debt to China ranks second, with that country owning roughly $859 billion of American debt.
What Is the History of the National Debt?
Since the founding of the United States and the American Revolution, debt has been a reality in America.
Creating a System of Lending
When America needed funding for the Revolutionary War in 1776, it appointed a committee, which would later become the Treasury, to borrow capital from other countries such as France and the Netherlands. Thus, after the Revolutionary War in 1783, the United States had already accumulated roughly $43 million in debt.
To cover some of this debt obligation, Alexander Hamilton, the first Secretary of the Treasury, rolled out federal bonds. The bonds were seemingly profitable and helped the government create credit. This bond system established an efficient way to make interest payments when the bonds matured and secure the government’s good faith state-side and internationally.
Using Debt to Fund War
The debt load steadily grew for the next 45 years until President Andrew Jackson took office. He paid off the country’s entire $58 million debt in 1835. After his presidency, however, debt began to accumulate again into the millions once again.
Flash forward to the American Civil War, which ended up costing about $5.2 billion. To manage some of the debt at hand, the government instituted the Legal Tender Act of 1862 and the National Bank Act of 1863. Both initiatives helped lower the debt to $2.1 billion.
The government borrowed money again to fuel World War I, and then substantially more money to pay for public works projects, and to stem deflation during the Great Depression. It borrowed even more to pay for World War II, reaching $258 billion in 1945.
The Debt Ceiling Is Established
Since 1939, the United States has had a debt ceiling, which limits the total amount of debt that the federal government can accumulate. The Treasury can continue to borrow money to fund government operations, but the total debt cannot exceed the prescribed limit.
However, Congress regularly raises the ceiling. The latest change came in June 2023, when President Biden signed a bill that suspended the limit until January 2025, in exchange for imposing some cuts on federal spending.
Since the debt ceiling was first introduced, American debt’s growth continued, with the pace accelerating in the 1980s. U.S. debt tripled between 1980 and 1990. In 2008, quantitative easing during the Great Recession more than doubled the national debt from $2.1 trillion to $4.4 trillion.
More recently, the national debt has increased substantially, with Covid-related stimulus and relief programs adding nearly $2 trillion to the national debt over the next decade.
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Why the National Debt Matters to Investors
As the national debt continues to rise, some policymakers worry about the sustainability of increasing debt, and how it will impact the future of the nation. That’s because the higher the U.S. debt, the more of the country’s overall budget must go toward debt payments, rather than on other expenses, such as infrastructure or social services.
Those worried about the increase in debt also believe that it could lead to lower private investments, since private borrowers may compete with the federal government to borrow funds, leading to potentially higher interest rates that can affect investments and lower confidence.
In addition, research shows that countries confronted with crises while in great debt have fewer options available to them to respond. Thus, the country takes more time to recover. The increased debt could put the United States in a difficult position to handle unexpected problems, such as a recession, and could change the amount of time it moves through business cycles.
Additionally, some worry that continued borrowing by the country could eventually cause lenders to begin to question the country’s credit standing. If investors could lose confidence in the U.S. government’s ability to pay back its debt, interest rates could rise, increasing inflation or other investment risks. While such a shift may not take place in the immediate future, it could impact future generations.
The Takeaway
The national debt is the amount of money that the U.S. government owes to creditors. It’s a number that’s been steadily increasing, which some investors and policymakers worry could have a negative impact on the country’s economic standing going forward.
Some economists believe that the growing national debt could lead to higher interest rates and lower stock returns, so it’s a trend that investors may want to factor into their portfolio-building strategy, especially over the long-term.
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FAQ
Who owns the most U.S. debt?
The largest amount of U.S. debt — about 42% or $15.6 trillion — is held domestically, by private investors and entities such as institutions, corporations, and individual investors.
How serious is the U.S. debt crisis?
Given that the national debt exceeds the U.S. GDP, many investors are concerned that without finding ways to stem the tide of borrowing, the economy could suffer slower growth, higher interest rates — not to mention the risk of a financial crisis, if the U.S. were to default.
Could the U.S. default on its debts?
The United States has never defaulted on any of its debt obligations, and it’s unlikely it will do so now. A more likely scenario is that the government will move to extend the debt ceiling to allow more borrowing.
About the author
Ashley Kilroy
Ashley Kilroy is a seasoned personal finance writer with 15 years of experience simplifying complex concepts for individuals seeking financial security. Her expertise has shined through in well-known publications like Rolling Stone, Forbes, SmartAsset, and Money Talks News. Read full bio.
Photo credit: iStock/Dan Comaniciu
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