WASHINGTON, Jan 28 (Reuters) – The White House, under President Donald Trump, has ordered an immediate pause on all federal grants and loans starting Tuesday, a sweeping decision that could disrupt vital programs in education, health care, housing assistance, disaster relief, and more—all reliant on billions in federal funding.
In a Monday memo, the acting head of the Office of Management and Budget announced the freeze, explaining that funds would remain on hold while the Trump administration reviews grants and loans to ensure alignment with the president’s priorities. This includes compliance with recently signed executive orders ending diversity, equity, and inclusion (DEI) programs.
The decision signals a major shift in federal spending priorities, with potentially far-reaching consequences for programs nationwide.
The OMB memo said Tuesday’s freeze included any money intended “for foreign aid” and for “nongovernmental organizations,” among other categories.
The White House said the pause would not impact Social Security or Medicare payments or “assistance provided directly to individuals.” That would presumably spare disability payments and the SNAP food program for the poor, though it was not clear whether health care programs for veterans and low-income people would be affected.
Last week, the administration froze U.S. assistance abroad, and on Tuesday began halting the supply of critical, lifesaving medical resources—including drugs for HIV, malaria, and tuberculosis, as well as newborn medical supplies—in countries supported by the United States Agency for International Development (USAID).
The United States, the largest single donor of global aid, disbursed $72 billion in assistance in 2023. Trump’s decision to suspend these programs has raised concerns over the humanitarian impact on vulnerable populations worldwide, including millions dependent on U.S.-funded health initiatives.
Domestically, the freeze impacts a broad range of federal grants and loans, with exceptions made for Social Security, Medicare, and direct assistance programs like SNAP. However, the effects on other essential services, such as health care programs for veterans and low-income families, remain uncertain.
This bold and controversial move marks a dramatic shift in U.S. policy, with potentially devastating consequences for both domestic and international aid programs.
he OMB memo is the latest directive in the Trump administration’s campaign to dramatically reshape the federal government, the nation’s largest employer.
In a blizzard of executive actions, the new president has shuttered all diversity programs, imposed a hiring freeze, sent national security officials home and sought to strip away job protections from thousands of civil servants.
The spending freeze ordered by OMB takes effect at 5 p.m. ET (2200 GMT) on Tuesday. Agencies have until Feb. 10 to submit detailed information on any programs subject to the suspension.
Federal Funding Freeze Sparks Alarm Among Nonprofits and Democrats
The federal government’s decision to halt funding has sent shockwaves across a wide array of nonprofit organizations, many of which depend on federal support to deliver critical services.
“From pausing research on childhood cancer cures to halting food assistance, domestic violence safety programs, and suicide hotlines, even a brief funding freeze could be devastating and cost lives,” said Diane Yentel, president and CEO of the National Council of Nonprofits, in a statement.
The freeze is also expected to disrupt state and local governments that rely heavily on federal aid for essential programs such as highway construction, school lunches, and foster care. Low-income states like Louisiana and Mississippi, which overwhelmingly supported Trump in the November election, could be hit particularly hard.
The freeze notably excludes disaster aid for areas recently ravaged by natural disasters, such as Los Angeles and western North Carolina. Trump, who visited both regions last week, pledged government support during his trips.
Democrats Slam ‘Unlawful’ Order
The memo revealed that the federal government allocated nearly $10 trillion in fiscal year 2024, with over $3 trillion going toward grants and loans. However, these figures appear to include funds authorized but not yet spent. According to the nonpartisan Congressional Budget Office, actual government spending was closer to $6.75 trillion.
While Trump’s Republican allies have pushed for dramatic spending cuts, his promise to protect Social Security and Medicare places roughly one-third of the budget off-limits. Additionally, interest payments, which made up 11% of the budget in 2024, cannot be touched without risking a global economic crisis.
Democrats wasted no time challenging the legality of the freeze. In a letter to Acting OMB Director Vaeth on Monday, Senator Patty Murray and Representative Rosa DeLauro, the leading Democrats on congressional appropriations committees, called the order “breathtaking, unprecedented, and devastating.”
“We urge you in the strongest possible terms to uphold the law and the Constitution and ensure all federal resources are delivered in accordance with the law,” they wrote.
Senate Democratic Leader Chuck Schumer condemned the freeze, stating the administration lacks the authority to halt spending already approved by Congress. He warned the order would result in “missed payrolls, unpaid rent, and chaos for universities, nonprofits, disaster assistance, local law enforcement, aid for the elderly, and food assistance for those in need.”
In a post on X, Schumer called the move “reckless and harmful to millions of Americans.”
Republicans Back Trump’s Bold Move
Representative Tom Emmer, the third-ranking Republican in the House, defended Trump’s decision as a fulfillment of his campaign promises.
“You need to understand he was elected to shake up the status quo. That’s what he’s going to do. It’s not going to be business as usual,” Emmer told reporters at a Republican policy retreat in Miami.
While the U.S. Constitution grants Congress control over spending, Trump has argued that the president has the power to withhold funds if he disagrees with how they are allocated. His nominee for White House budget director, Russell Vought, who is awaiting Senate confirmation, has previously advocated for this interpretation, suggesting Congress can authorize but not compel spending.
This isn’t Trump’s first clash over federal funds. During his first term (2017-2021), he attempted to redirect spending toward border enforcement, sparking a standoff with Congress that resulted in the longest government shutdown in U.S. history. Additionally, his decision to withhold $400 million in aid to Ukraine in 2019, to pressure the country into investigating political rival Joe Biden, led to Trump’s first impeachment.
