The Postal Service is in a position not many Americans can claim: debt free. But even a projected surplus won't stop next month's postal rate hike, which the service says is needed to cover certain expenses.

Once $11 billion in the red, the post office paid off the remaining $1.8 billion of its debt in 2005, postal Chief Financial Officer Richard Strasser said Tuesday.

It's the first time the Postal Service has been without debt since it was organized from the old post office in the 1970s.

Overall, the Postal Service finished fiscal 2005 with a $1.4 billion surplus on revenue of $69.9 million and investment income of $86 million, minus expenses of $68.3 billion and interest of $265 million.

Strasser said the agency's plan for 2006 was for a $1.3 billion surplus, but a requirement that it place $3 billion in escrow is forcing it to raise postal rates on Jan. 8 to cover the added expense. The price of a first-class stamp will go from 37 cents to 39 cents and other rates will rise accordingly.