White House Orders Pause of Agency Grant, Loan, and Financial Assistance Programs

The White House Office of Management and Budget (OMB) issued a memorandum (M-25-13) to departments and agencies ordering the temporary pause of all activities – effective 5:00 p.m. on Tuesday, January 28 – related to the obligation or disbursement of all Federal financial assistance to ensure agencies are complying with President Trump’s executive orders (EOs) to “ensure that Federal funds are used to support hardworking American families.” 

Despite a federal judge staying the OMB ordered spending pause until Monday, February 3, numerous questions remain about the original order, particularly if the judge allows the pause to proceed.

While the broad ranging order requires Federal agencies to identify and review all Federal financial assistance programs and supporting activities, it specifically targets programs that “advance Marxist equity, transgenderism, and green new deal social engineering policies” as a “waste of taxpayer dollars.” OMB referenced activities that may be implicated – financial assistance for foreign aid, nongovernmental organizations, diversity, equity, and inclusion (DEI), gender ideology, and the green new deal – through the series of EOs issued by the President since his inauguration, including: 

• Protecting The American People Against Invasion (January 20)
• Reevaluating And Realigning United States Foreign Aid (January 20)
• Putting America First In International Environmental Agreements (January 20)
• Unleashing American Energy (January 20)
• Ending Radical And Wasteful Government DEI Programs And Preferencing (January 20)
• Defending Women From Gender Ideology Extremism And Restoring Biological Truth To The Federal Government (January 20)
• Enforcing the Hyde Amendment (January 24) 

The memo does exempt from the temporary freeze payments impacting Medicare or Social Security benefits, as well as other programs providing direct aid to individuals. In addition, OMB may grant exceptions allowing Federal agencies to issue new awards or take other actions on a case-by-case basis. 

Potential Impact 

The memo noted that of the $10 trillion the Federal Government spent in FY 2024, more than $3 trillion was in the form of Federal financial assistance, grants, and loans. The temporary pause, in essence, could potentially represent a major stoppage in the flow of funds from programs that would be equivalent to about 20 percent of all federal spending – not including interest on the debt – though exemptions could reduce that figure. At the very least, hundreds of billions of dollars in federal grants and loans will be immediately frozen while the White House directive goes into effect and the ramification of the order plays out. 

A follow-up OMB guidance clarified that the pause will not affect several specific aid programs, such as Medicaid; Supplemental Nutrition Assistance Program; federal student loans, Pell Grants, Head Start, Section 8 rental assistance, and aid to small businesses and farmers. The guidance indicated that the only funding affected by the freeze would be any grants or loans that run counter to President’s EOs laying out his policies on immigration; abortion; foreign aid; clean energy; diversity, equity and inclusion programs; and "gender ideology", as well as funding of nongovernmental organizations that undermine the national interest. 

Despite the clarification from administration officials, the scope of the 2-page memo remains unclear – leaving much uncertainty into what federal programs could be impacted. Ultimately, which specific federal program gets targeted will be determined not just by each agency, but the White House and political appointees (and perhaps, eventually, by a court of law). 

Next Steps for Agencies 

As a follow-up to the memorandum temporarily blocking disbursement of grants and loans, OMB issued instructions to agencies for complying with the freeze, which includes instruction sheets asking the federal agencies to inform OMB about all planned obligations and disbursements through March 15. The document asks the agencies, by February 7, to identify a "senior political appointee" responsible for overseeing each program, as well as to identify the estimated date of the next obligation or disbursement of funds. 

The follow-up instruction provides a spreadsheet that includes over 2,600 specific accounts within agencies across the government, as well as questions intended to ensure federal programs are in compliance with Trump's executive orders and policy goals. The questions request information relating to, for example, immigration, foreign assistance, climate change, DEI, gender ideology, and the Hyde Amendment (a federal provision prohibiting the use of federal funds to pay for abortion).  

The OMB memo pausing disbursements orders agencies to submit, by February 10, information on any programs, projects or activities subject to the freeze. Each agency must pause: 

• issuance of new awards;
• disbursement of Federal funds under all open awards; and
• other relevant agency actions that may be implicated by the executive orders, to the extent permissible by law, until OMB has reviewed and provided guidance to the agency with respect to the information submitted. 

OMB said that the temporary pause will allow the Administration to review agency programs and determine the best use of funding consistent with the law and the President’s priorities. OMB will likely take a yet to be determined amount of time to review the agency submissions and then make a decision on what programs to restart and what programs should remain paused – the most likely of the latter will be programs in conflict with the EOs. At this point, OMB will likely seek to indefinitely “defer” certain grants and loans which will result in a court battle to ultimately determine the constitutionality of the Congressional Budget and Impoundment Control Act of 1974 (Public Law 93-344). 

Lawsuits Imminent 

While the President is generally allowed to defer spending for a period of time if certain conditions are met, the legality of the OMB order will be contested. The Congressional Budget and Impoundment Control Act of 1974 prohibits presidential impoundment of funds appropriated by Congress, as well as various individual appropriations and authorization statutes. The Act establishes procedures the President must follow to propose delaying or rescinding funding. 

The follow-up OMB guidance argued that the pause is not an impoundment under the Impoundment Control Act, but rather “a temporary pause to give agencies time to ensure that financial assistance conforms to the policies set out in the President’s Executive Orders, to the extent permitted by law.” 

A group of attorneys general in Democratic-controlled states have announced their intention to file a lawsuit to block the order. Among the states suing include New York, California, Illinois, Massachusetts, New Jersey, and Rhode Island. 

In response to the order, Senate Minority Leader Chuck Schumer (D-NY) issued a statement calling on the President to reverse the directive, “Congress approved these investments and they are not optional, they are the law…Donald Trump’s Administration is jeopardizing billions upon billions of community grants and financial support that help millions of people across the country. It will mean missed payrolls and rent payments and everything in between: chaos for everything from universities to non-profit charities.” 

In a letter to Acting OMB Director Matthew Vaeth, House and Senate Appropriations Committee Democratic leaders, Rep. Rosa DeLauro (D-CT) and Sen. Patty Murray (D-WA), warned that the scope of the order is “breathtaking, unprecedented, and will have devastating consequences across the country” and called on the Administration to “uphold the law and the Constitution and ensure federal resources are delivered in accordance with the law.” 

The memo acknowledged the legal limits of executive power to interfere in legally mandated programs, stating that agencies should carry out the pause “to the extent permissible under applicable law.”