Trump orders pause on federal grants and loans: here’s what it means

The Trump administration has announced a temporary halt to federal grants and loans starting Tuesday, a move that could significantly impact a wide range of programs, including education, housing assistance, disaster relief, and healthcare initiatives reliant on billions in federal funding.

In a memo issued Monday, the acting head of the Office of Management and Budget (OMB), Matthew Vaeth, directed federal agencies to pause financial disbursements while reviewing their alignment with President Donald Trump’s priorities, including his recent executive orders ending diversity, equity, and inclusion (DEI) programs.

Vaeth stated that federal funds used for policies conflicting with the administration’s agenda represent “a waste of taxpayer dollars that does not improve the day-to-day lives of those we serve.”

The freeze encompasses categories such as foreign aid and funding for non-governmental organizations while exempting Social Security, Medicare, and other direct assistance programs.

However, uncertainty remains about whether healthcare benefits for veterans and low-income populations might be affected.

The OMB memo claims the federal government spent nearly $10 trillion in fiscal year 2024, with over $3 trillion allocated to grants and loans, although these figures differ from Congressional Budget Office estimates, which reported $6.75 trillion in total government spending.

Funding pause could have severe consequences for nonprofits

Critics warn that the funding pause could have severe consequences for nonprofits and government initiatives serving vulnerable populations.

Diane Yentel, CEO of the National Council of Nonprofits, called the directive “a potential five-alarm fire,” citing potential disruptions to research on childhood cancer cures, domestic violence prevention, suicide hotlines, and food assistance.

“This pause, even if brief, could have devastating and life-threatening consequences,” Yentel said.

Programs such as the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), Section 8 housing vouchers, and the Low Income Home Energy Assistance Program (LIHEAP) are expected to face delays, raising concerns from advocates and experts.

Democrats have strongly criticized the order as both unlawful and dangerous.

Senate Democratic Leader Chuck Schumer argued the administration lacks authority to withhold funds approved by Congress, warning the freeze could harm millions of Americans.

“It will mean missed payrolls and rent payments, chaos for everything from universities to disaster assistance, law enforcement, and food aid,” Schumer posted on X.

Chuck Schumer

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The blast radius of Trump’s terrible, unconstitutional, and illegal decision to halt virtually all federal grants and loans is virtually limitless. And its impacts will be felt over and over and over again by families and communities across the country.

9:46 PM · Jan 28, 2025

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In a letter to Vaeth, Senator Patty Murray and Representative Rosa DeLauro labeled the directive “breathtaking” and “unprecedented,” urging the administration to uphold constitutional and legal requirements to disburse federal resources as mandated by Congress.

Agencies to halt fund disbursements by 5 p.m. ET

The spending freeze reflects Trump’s broader efforts to reshape federal governance, including previous executive actions to shutter diversity programs, impose a hiring freeze, and pause foreign aid.

The new directive compels agencies to halt fund disbursements by 5 p.m. ET Tuesday and submit details on affected programs by February 10.

Supporters of the decision, including US Representative Tom Emmer, a top House Republican, defended Trump’s actions as a fulfillment of his campaign promise to disrupt Washington’s status quo.

“Trump was elected to shake things up. It’s not going to be business as usual,” Emmer said during a Republican retreat in Miami.

As the freeze takes effect, legal and constitutional challenges loom, setting the stage for a contentious debate over the balance of power between Congress and the executive branch in determining federal spending.

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