Trump administration directs widespread pause of federal loans and grants

The Trump administration late Monday directed federal agencies to pause the disbursement of loans and grants while the government conducts a review to ensure spending aligns with President Trump’s agenda.

A memo issued by Matthew Vaeth, acting director of the Office of Management and Budget (OMB), directs federal agencies to temporarily pause “all activities related to obligation or disbursement of all Federal financial assistance.”

“This temporary pause will provide the Administration time to review agency programs and determine the best uses of the funding for those programs consistent with the law and the President’s priorities,” the memo states.

The memo indicates Social Security or Medicare benefits should not be impacted, nor should assistance provided directly to individuals, such as those who benefit from the Supplemental Nutrition Assistance Program (SNAP).

The pause goes into effect at 5 p.m. on Tuesday, according to the memo, which was reviewed by The Hill. OMB may grant exceptions for certain awards on a case-by-case basis, the memo states.

Federal agencies are instructed to conduct a review to determine whether federal loan and grant programs are impacted by Trump’s wave of executive orders signed during his first week in office. Those orders were related to border security, the federal workforce, ending the “weaponization” of government, the military and other aspects of government.

A senior Trump administration official asserted the memo did not amount to a funding freeze. They argued that if an agency found its funding was not in conflict with Trump’s agenda, it would be disbursed without issue.

The senior Trump official disputed that the pause amounted to an impoundment of federal funds. Instead, they argued temporary pauses are necessary for new administrations to ensure spending aligns with priorities and executive orders.

While the senior administration official suggested pauses could in some cases be lifted in as little as one day, the lack of clarity has led to panic among nonprofit groups that benefit from federal funding.

“This order is a potential five-alarm fire for nonprofit organizations and the people and communities they serve,” Diane Yentel, president of the National Council of Nonprofits, said in a statement. “From pausing research on cures for childhood cancer to halting food assistance, safety from domestic violence, and closing suicide hotlines, the impact of even a short pause in funding could be devastating and cost lives.”

Senate Minority Leader Chuck Schumer (D-N.Y.) lambasted the move in a statement late Monday, saying the pause on federal disbursements “blatantly disobeys the law” and expressing skepticism that it is just a temporary hold.

“Congress approved these investments and they are not optional; they are the law. These grants help people in red states and blue states, support families, help parents raise kids, and lead to stronger communities,” Schumer said.

“Donald Trump’s Administration is jeopardizing billions upon billions of community grants and financial support that help millions of people across the country,” he added. “It will mean missed payrolls and rent payments and everything in between: chaos for everything from universities to non-profit charities.”

Trump and his nominee to lead OMB, Russell Vought, have signaled they may seek to expand presidential authority over the agency. Trump has also talked about challenging the Impoundment Control Act by using presidential authority to hold back certain funding appropriated by Congress. 

Updated Jan. 28 at 11:11 a.m. EST