Treasury has issued savings bonds since 1935. Savings bonds offer investors the ability to purchase securities with lower minimum denominations than those for marketable Treasury securities. When individuals purchase savings bonds, they loan the amount they paid for the bonds to the U.S. government. Over a period of time (up to 30 years), the savings bonds earn interest and, after 12 months of their original purchase, can be cashed in for their purchase price, plus the interest they have earned, subject to a 3-month interest penalty during the first 5 years. Over the years, Treasury has offered a number of savings bonds with different terms and interest rates. Currently, Treasury offers Series EE bonds, which have a fixed interest rate, and Series I bonds, which pay an interest rate that is tied to inflation. Savings bonds do not represent a major source of funds for the Treasury. The Bureau of the Fiscal Service, one of Treasury’s 10 bureaus, helps to fund the federal government by selling Treasury securities, including savings bonds. Treasury Securities Services within the bureau operates Treasury’s Retail Securities program, which allows retail investors to purchase savings bonds and marketable securities in electronic form directly from Treasury. The office’s flagship system is TreasuryDirect, an online proprietary system created in 2002 that allows customers to buy and hold savings bonds and marketable securities, and to manage their accounts without assistance from a customer service representative. TreasuryDirect customers can purchase securities at any time, direct electronic payments to bank accounts, and convert paper savings bonds to electronic savings bonds in the same series and with the same issue date. TreasuryDirect customers also can set up payroll deductions and automatically recurring purchases. As of March 2015, TreasuryDirect had around 580,700 accounts that were funded and held nearly $27 billion. The elimination of paper savings bonds reduced program costs but made purchasing bonds more difficult for some savers. However, our analysis of Treasury’s bond data showed that the drop in bond purchases after the elimination of paper savings bonds was not statistically significant. As shown in figure 1, annual purchases of U.S. savings bonds declined significantly from 2001 through 2013, falling from around $14.6 billion to less than $1 billion, or by more than 90 percent.savings bond purchases declined every year, except from 2002 to 2003. Likewise, the role of savings bonds in helping to fund the federal debt also declined over the period, accounting for about 3.2 percent of the federal debt in 2001 and about 1.0 percent in 2013. Following the long-term decline in savings bond purchases, Treasury stopped selling paper savings bonds through over-the-counter channels, including through financial institutions and mail-in orders, on January 1, 2012, as part of its agency-wide electronic initiative to reduce program costs and improve customer service. According to Treasury officials, the agency phased out the issuance of paper savings bonds through employer-sponsored payroll savings plans in 2010, and the ending of savings bond sales through over-the-counter channels was the last step of discontinuing paper savings bonds. Treasury estimated that the elimination of over-the-counter sales of paper savings bonds would save nearly $70 million in program costs from 2012 through 2016. Treasury calculated these savings by estimating how much it would save in costs associated with issuing new paper bonds and servicing and redeeming existing paper bonds, which include fees paid to banks, postage, and printing. For example, Treasury estimated that the change would eliminate around $14.5 million in fees paid to financial institutions for issuing and redeeming savings bonds and around $12.7 million in postage expenses for mailing paper bonds to customers over the 5-year period. Additionally, Treasury estimated that it would save in personnel costs because fewer employees would be needed to process customer service transactions. According to Treasury’s estimates, the change would save around $4.9 million in compensation and benefit costs for Treasury staff and $28.5 million in Federal Reserve Bank personnel costs over the 5-year period. Finally, Treasury estimated $9 million in savings from reductions in paper stock, overhead, forms, and other costs. In addition to the cost savings, Treasury expected the change to provide customer benefits, such as increased security and convenience. Although paper bonds allowed buyers to purchase savings bonds at financial institutions, Treasury’s online system for purchasing savings bonds and other Treasury securities—TreasuryDirect—allows customers to buy, manage, and redeem savings bonds electronically at any time. Treasury officials told us that electronic bonds are safer and more secure, because paper bonds could be lost, stolen, altered, or fraudulently redeemed. Treasury officials also added that electronic bonds provide the agency with both operational advantages and enhanced customer experience, since Treasury can automatically track bond purchases, redemptions, and values for the customer. When Treasury eliminated paper savings bonds, it created access challenges for bond buyers who do not have a bank account and Internet access. Customers now must use TreasuryDirect to purchase electronic savings bonds, although some can purchase paper savings bonds through the Tax Time program, which we discuss later in this report. To open a TreasuryDirect account, a customer generally must have both Internet access and a bank account. While TreasuryDirect can be accessed through cellular phones and other mobile devices, the website is not optimized for such use. According to representatives from a nonprofit organization that focuses on savings for lower-income households, mobile access is the primary means of Internet access for some lower-income consumers. According to 2011 Census Bureau data, around 50 percent of households with less than $25,000 in income did not have computer-based Internet access from some location.according to the 2013 Federal Deposit Insurance Corporation’s (FDIC) National Survey of Unbanked and Underbanked Households, 7.7 percent of U.S. households, or nearly 9.6 million households, were unbanked— Further, that is, they did not have a bank account at an insured institution.result, such households or individuals may not be able to access TreasuryDirect or complete a transaction if they wanted to buy savings bonds. Treasury officials recognized the access challenges related to TreasuryDirect that some potential users might face, but told us such challenges could be mitigated. Treasury officials said that they worked with organizations that provided Internet access to the public, such as libraries and community centers, and determined that such organizations provide the level of Internet access required for potential TreasuryDirect users. The officials also told us that in lieu of a bank account, individuals could use reloadable debit cards to purchase and redeem savings bonds through TreasuryDirect. While the use of such cards provides an avenue for those without a traditional bank account to purchase savings bonds, Treasury estimated that few savings bonds, approximately 1,426, had been purchased using prepaid debit cards from mid-April 2005 through mid-November 2014. Further, Treasury officials told us that unbanked individuals could use the Tax Time program to purchase paper savings bonds. Our analysis of IRS data on the Tax Time program indicates that around 91 percent of tax filers who used part of their tax refund to purchase paper savings bonds had part of their refund directly deposited into a bank account. Similarly, based on data from SCF surveys from 2001 through 2010, over 90 percent of households who owned savings bonds have bank accounts. Additionally, according to FDIC’s survey, more than 90 percent of all households the agency surveyed had a bank account. According to Treasury officials and representatives from several nonprofit organizations that we interviewed, TreasuryDirect also poses some usability challenges. For example, Treasury officials and nonprofit representatives told us that giving savings bonds as a gift through TreasuryDirect can be a cumbersome process. They explained that TreasuryDirect requires the individual buying the savings bond to have the Social Security number and TreasuryDirect account number of the recipient of the gift bond, information the individual may not know. The gifting process also requires the recipients or their parents or guardians to set up a TreasuryDirect account, if they do not have one. Treasury officials told us that issues associated with the process of buying bonds as gifts were the source of the most common complaints from customers about savings bond transactions through TreasuryDirect. In addition, representatives from nonprofit organizations and an academic we interviewed told us that TreasuryDirect generally was not a user-friendly system, even for individuals who were comfortable using the Internet for their financial transactions. They told us that navigating the system was not easy and could pose challenges to potential customers who were not familiar with online financial transactions. Similarly, Treasury officials told us that customers anecdotally had expressed concerns about difficult navigation, lengthy application pages, organization of information, security features, complicated linked accounts processes, and difficulty locating tax reporting information. When Treasury eliminated paper savings bonds in January 2012, there were nearly 379,000 total funded TreasuryDirect accounts.580,000 total funded TreasuryDirect accounts, but the extent to which the increase resulted from savings bond investors has not been determined. Our analyses of Treasury savings bond data indicated that the decline in savings bond purchases after Treasury discontinued the sale of paper savings bonds in January 2012 was consistent with the overall long-term decline in savings bond purchases. In addition, the decline since January 2012 generally was not statistically significant based on models we estimated. While there was a large decline in purchases in 2012 and 2013 when sales of paper savings bonds were discontinued, there are a number of factors that could account for this decline. For example, savings bond purchases declined in 9 out of 10 years from 2002 to 2011, and some declines were quite large, hence recent declines in purchases may be reflective of long-term trends. In addition, we found that savings bond purchases have been sensitive to interest rate changes, with savers typically purchasing more when interest rates are higher and purchasing less when they are lower. The low interest rates in recent years may account for some of the decline in savings bond purchases. Although lower-income households that do not have bank accounts or Internet access could face challenges accessing or using TreasuryDirect, this challenge may only affect a small percentage of such households.