The Knowledge
Where Does Federal Money Go? The Biggest Costs Behind the Budget
Where does federal money go? Part two of our National Debt Explained series examines the biggest expenses in the 2025 budget and how spending connects to government borrowing.
The Knowledge | National Debt Explained, Part 2
When discussing debt, ask: Who borrowed the money? That question helps distinguish a family’s finances from the federal budget. Our first episode explained why your credit card balance is separate from the national debt. Now comes the next question: What does the federal government spend money on?
Much of it pays for retirement benefits, health coverage, national defense, public services, and interest on previous borrowing.
Social Security was the largest individual program in fiscal year 2025, costing approximately $1.6 trillion. But combine the major health care programs—including Medicare, Medicaid, and health insurance subsidies—and their spending reached about $1.8 trillion, exceeding Social Security alone. cbo.gov
The figures below cover October 1, 2024, through September 30, 2025.Major expense FY 2025 spending What it supports Social Security About $1.6 trillion Retirement, survivor, and disability benefits Medicare, net $988 billion Health coverage for older adults and certain people with disabilities Net interest $970 billion Cost of servicing publicly held federal debt, after subtracting interest income Discretionary defense $893 billion Military personnel, operations, equipment, and research Medicaid $668 billion Federal contribution toward health coverage and care for eligible people
These are selected expenses, not the entire budget. Medicare spending is shown after premiums and other offsetting receipts. The combined health care total already includes Medicare and Medicaid, so it should not be added to those rows. cbo.gov
The government also supports veterans’ health care, transportation, education, housing assistance, courts, law enforcement, scientific research, disaster response, and environmental protection. Nondefense discretionary spending totaled approximately $980 billion in 2025, covering many of these services. Some funding for these areas falls elsewhere in the budget. cbo.gov
Federal spending falls into three broad groups:
- Mandatory spending: Payments governed by existing eligibility rules and benefit formulas, including Social Security and major health programs.
- Discretionary spending: Funding lawmakers control through appropriations legislation, including most defense spending and many public services.
- Net interest: The expense of servicing publicly held federal debt, minus government interest income. cbo.gov
Interest deserves attention because it pays for borrowing already undertaken. In 2025, net interest exceeded discretionary defense spending. Congressional Budget Office
A program’s cost does not automatically translate into an equal increase in national debt. Taxes and other receipts finance much of federal spending. Social Security and Medicare’s hospital insurance program receive dedicated payroll taxes, while Medicare also collects premiums.
In 2025, federal spending totaled approximately $7 trillion, compared with $5.2 trillion in revenue. The roughly $1.8 trillion shortfall was the deficit, requiring borrowing. Understanding national debt therefore means examining both what government spends and what it collects. cbo.gov
Explore more explanations behind the headlines at STM Daily News, home of The Knowledge.
Sources for this episode
- CBO: The Federal Budget in Fiscal Year 2025 — Overview of spending, revenue, deficits, and debt interest.
- CBO: Mandatory Spending in Fiscal Year 2025 — Breakdown of Social Security, Medicare, Medicaid, and other benefit programs.
- CBO: Discretionary Spending in Fiscal Year 2025 — Defense spending and services including transportation, education, and veterans’ health care.
- CBO: Overview of the FY 2025 Budget Infographics — Highlights the largest expenses and broader budget trends.
Related reading
- U.S. Treasury: Understanding the National Debt — What federal debt represents and how borrowing works.
- U.S. Treasury: Understanding the National Deficit — Explains the difference between an annual deficit and accumulated debt.
- U.S. Treasury: Federal Spending — Additional context about where federal money goes.
Daily News
Whose Debt Is the National Debt?
The national debt isn’t Americans’ credit card balances added together. This simple explainer separates federal borrowing from household debt and explains the difference between debt and a deficit.
Last Updated on October 11, 2026 by Daily News Staff
The Knowledge | STM Daily News
When you hear “national debt,” do you picture everyone’s credit card balances added together? The name can create that impression, but the national debt and household debt measure different borrowing.
The U.S. national debt is money the federal government owes. Your personal credit card balance is not included.
Federal debt versus household debt
The Treasury defines national debt as the federal government’s total outstanding borrowing accumulated over the country’s history. Household debt covers borrowing by individuals and families, including mortgages, credit cards, auto loans, and student loans.
|Type of debt |Who borrowed? |Examples |
|————–|————————|————————————————–|
|National debt |Federal government |Outstanding Treasury securities |
|Household debt|Individuals and families|Credit cards, mortgages, auto loans, student loans|
Putting a $500 purchase on your credit card increases your personal balance. It does not add $500 to the national debt.
How does the national debt grow?
When federal spending exceeds tax collections and other revenue, the government runs a budget deficit. Treasury sells securities to borrow money to cover the gap.
Consider a simplified, hypothetical example: the government collects $5 trillion and spends $6 trillion in one year. That leaves a $1 trillion deficit requiring financing.
A deficit measures a shortfall over a period, usually a year. Debt measures outstanding borrowing accumulated over time. Repeated deficits generally increase that debt. Interest on existing borrowing is also a federal expense.
Does paying off your credit card reduce the national debt?
Paying off a card reduces what you owe your lender. It does not directly repay Treasury borrowing. Household debt and government debt can influence the same economy, but they remain separate obligations.
When discussing debt, ask: Who borrowed the money? That one question helps distinguish a family’s finances from the federal budget.
Find more explanations of the ideas behind the headlines at STM Daily News, home of The Knowledge.
Sources
● U.S. Treasury: Understanding the National Debt
● U.S. Treasury: Understanding the National Deficit
● Federal Reserve Bank of New York: Household Debt and Credit Report
Science
October Meteor Showers Give Phoenix Skywatchers a Reason to Look Up
Phoenix skywatchers have several chances to catch October’s meteor showers. Here’s when to watch the Taurids and Orionids—and how moonlight affects the view.
Last Updated on October 10, 2026 by Daily News Staff
PHOENIX — October is bringing several opportunities to spot shooting stars over the Valley, with the Draconids reaching their October 8–9 peak and more meteor activity ahead.
The Draconids remain active through October 10, although viewers should expect a light display as the peak passes. Under favorable conditions, the shower typically produces only a handful of meteors per hour. timeanddate.com
Next, the Southern Taurids have an annual activity peak around October 14. Known for occasional bright fireballs, the shower continues into November. The stronger Orionids peak on the night of October 21 into the morning of October 22, typically producing 10–20 meteors per hour under dark skies. A bright Moon will interfere with this year’s display. American Meteor Society
The Orionids originate from debris left by Halley’s Comet. For Phoenix viewers, the best opportunity will be after moonset and before dawn, weather permitting. City lights will further reduce the number visible. amsmeteors.org
NASA recommends finding a viewing area away from streetlights, allowing about 30 minutes for eyes to adjust, and watching a broad stretch of sky. No telescope is needed—just a comfortable chair and patience. NASA Science
ECurious about what’s happening above us? Explore more space stories and science explainers in The Knowledge at STM Daily News.xplore more space, science and everyday
College Life
Is College Worth It? New U.S. News Rankings Put More Weight on What Graduates Earn
Is college worth it? MIT has taken the No. 1 spot in the 2027 U.S. News Best Colleges rankings, ending Princeton’s 15-year run. But a new Earnings by Major metric could be even more important for families asking whether college is worth the investment.
For millions of students and families, choosing a college increasingly comes down to a basic question: Is college worth it?
The latest U.S. News & World Report Best Colleges rankings are attempting to provide another piece of information to help answer that question.
The 2027 rankings place the Massachusetts Institute of Technology (MIT) at No. 1 among National Universities, ending Princeton University’s 15-year run at the top. But perhaps the bigger story for prospective students isn’t which university occupies the No. 1 position.
It’s a significant change in how U.S. News measures the value of attending college.
For the first time, the rankings include an Earnings by Major factor designed to examine what graduates earn after leaving school — and to compare those earnings with graduates who studied the same subjects elsewhere.
Is College Worth It? U.S. News Looks Beyond Graduation
College has traditionally been promoted as an investment in a person’s future. But as families confront tuition, housing expenses and the possibility of student debt, simply earning a degree may no longer be enough information when deciding where — or whether — to attend.
Students increasingly want to know what happens after graduation.
The new U.S. News Earnings by Major metric examines graduate earnings four years after graduation using data from the U.S. Department of Education’s College Scorecard.
Importantly, the system doesn’t simply compare the average salary of graduates from one university with another.
Instead, earnings are compared within specific academic disciplines.
That distinction matters.
A university graduating large numbers of engineers, computer scientists or students entering other relatively high-paying occupations could otherwise appear to produce stronger financial outcomes simply because of the subjects its students choose to study.
Comparing graduates within similar fields is intended to provide a clearer picture of how graduates from different institutions fare financially.
From Student Debt to Graduate Earnings
The new Earnings by Major metric replaces the Graduate Indebtedness factor previously used by U.S. News.
That represents an important shift in perspective.
Instead of focusing primarily on how much debt students accumulate, the new measure looks at one aspect of what students may receive financially from their education after entering the workforce.
The metric examines employed federal financial aid recipients whose highest degree is a bachelor’s degree.
According to U.S. News, the approach is intended to reduce the influence of family financial advantages and provide a better indication of the economic value institutions may contribute to graduates.
That doesn’t mean earnings alone determine whether a college education is worthwhile.
But for a student potentially investing tens of thousands of dollars — and several years of their life — knowing how graduates in a particular major perform economically can be an important part of the decision.
MIT Takes the No. 1 Spot
Against that changing methodology, MIT moved into the No. 1 position among National Universities in the 2027 rankings.
The top three are:
- Massachusetts Institute of Technology
- Princeton University
- Harvard University
Princeton’s move to second place ends a run at No. 1 that began with the 2012 edition of the rankings.
Among National Liberal Arts Colleges, Williams College remained No. 1, followed by Amherst College at No. 2. Bowdoin College, Claremont McKenna College, Pomona College and Swarthmore College tied for third.
Nearly 1,700 institutions were evaluated in the 2027 edition.
Outcomes Are Becoming a Bigger Part of the Equation
The addition of graduate earnings is part of a broader emphasis on student outcomes in the U.S. News methodology.
U.S. News says outcomes now account for more than half of a school’s total score.
Institutions can be evaluated using as many as 17 weighted measures, including graduation and retention rates, social mobility for lower-income students, post-graduate earnings, faculty resources and academic peer assessments.
The shift reflects a changing conversation surrounding higher education.
For generations, students were often encouraged to focus heavily on getting into the most prestigious college possible. Today’s students may also be asking more practical questions:
How much will it cost?
How much financial aid will I receive?
How much debt might I have when I graduate?
What do graduates in my intended major earn?
And perhaps most importantly:
Will the investment pay off for me?
College Value Isn’t Just About Salary
Graduate earnings can provide useful information, but salary shouldn’t be treated as the sole measurement of the value of higher education.
Different careers have dramatically different compensation structures.
A graduate pursuing teaching, public service, social work, the arts or nonprofit work may earn less than someone entering engineering, finance or technology while still considering their education worthwhile.
There are also benefits of higher education that are difficult to capture in a salary statistic.
That’s why students comparing schools may want to look beyond an institution’s overall ranking and examine factors such as net price after financial aid, scholarships, graduation rates, student debt, internship opportunities, career placement, location and the strength of the program they actually intend to study.
The best-known university isn’t automatically the best financial or educational choice for every student.
Economic Diversity Also Gets Attention
The 2027 rankings also highlight economic diversity among highly ranked institutions.
According to U.S. News, MIT and Princeton rank third and fourth, respectively, among the top 25 National Universities in the percentage of students receiving federal Pell Grants.
Pell Grants generally assist undergraduate students with significant financial need and typically do not have to be repaid.
Among the top 25 National Liberal Arts Colleges, Amherst College ranked highest for economic diversity under the U.S. News measure.
A New Ranking Looks at In-State Value
U.S. News is also placing additional attention on affordability for students considering public universities.
The 2027 edition introduces a Best Value Schools for In-State Students ranking, which evaluates public universities based on academic quality and affordability for residents.
The University of North Carolina at Chapel Hill took the No. 1 position in the inaugural ranking.
That category could be particularly relevant to families deciding whether the prestige associated with attending a private or out-of-state university justifies potentially higher costs compared with attending a public institution in their home state.
The Rankings Look Different This Year
There is another important caveat when comparing the 2027 results with previous years.
Changes to the Carnegie Classification framework resulted in approximately 20% of previously ranked institutions moving into different U.S. News categories.
Because some colleges are now being compared against different groups of institutions, their 2027 rankings may not be directly comparable with previous years.
The changes also expanded eligibility, allowing additional institutions specializing in areas such as engineering, business and health to enter the rankings.
U.S. News also introduced an undergraduate economics specialty ranking while continuing rankings covering areas such as social mobility, innovation, historically Black colleges and universities, artificial intelligence programs, internships, undergraduate research and study-abroad opportunities.
Public Universities, HBCUs and Social Mobility
Among public National Universities, the University of California, Berkeley and UCLA tied for the No. 1 position, followed by the University of Michigan–Ann Arbor.
The top three Historically Black Colleges and Universities were:
- Spelman College
- Howard University
- Tuskegee University
For social mobility among National Universities, Florida International University and the University of California, Riverside tied for No. 1, with Oakland City University ranked third.
These categories illustrate another reason students may want to look deeper than a school’s overall national position. Different rankings can reveal institutions performing particularly well in areas that may matter more to an individual student.
So, Is College Worth It?
There isn’t one answer that applies to every student.
The cost of attending, financial aid, chosen major, career goals, likelihood of graduating and potential debt can dramatically change the financial equation.
A college with a famous name and high national ranking could be a poor financial choice for one student while a less prominent public university with generous financial aid could be an excellent investment for another.
That’s what makes the addition of Earnings by Major noteworthy.
Instead of asking only “Which college ranks highest?”, prospective students now have another reason to ask a much more personal question:
“What am I paying for — and what could I realistically get in return?”
MIT replacing Princeton at No. 1 makes the headline.
But for students and parents trying to decide whether college is worth the cost, the growing emphasis on outcomes, affordability and post-graduation earnings may ultimately be the more important story.
Source: U.S. News & World Report, 2027 Best Colleges rankings, released September 22, 2026.
U.S. News & World Report press release:
MIT Claims No. 1 Spot in U.S. News 2027 Best Colleges Rankings PR Newswire
Stay Informed with STM Daily News
From education and personal finance to technology, lifestyle, transportation and the stories shaping our everyday lives, STM Daily News keeps you informed about what matters — and why it matters. Get more news, useful insights and the latest updates by visiting STM Daily News and subscribe to stay connected to the stories worth knowing.
