State and local governments have been thrown into chaos trying to interpret a pause in hundreds of billions of dollars worth of grants, loans, and other federal financial assistance ordered by the White House Office of Management and Budget (OMB) Monday night.
It is unclear how far-reaching the freeze is. But Americans of all ages, incomes, and careers could be impacted if the order goes into effect as planned, with low-income Americans getting hit particularly hard. While the freeze was set to take effect Tuesday at 5 p.m., a federal district judge granted an administrative stay in a case challenging it, pausing the plan for a week.
“It will mean missed payrolls and rent payments and everything in between: chaos for everything from universities to nonprofit charities, state disaster assistance, local law enforcement, aid to the elderly, and food for those in need,” said Senate Minority Leader Chuck Schumer (D-N.Y.).
The spending freeze was ordered in a memo from Matthew J. Vaeth, acting director of the OMB. It tells federal agencies to “temporarily pause all activities related to obligation or disbursement of all federal financial assistance.”
The memo says the freeze is necessary so Federal agencies can “identify and review all Federal financial assistance programs and supporting activities [are] consistent with the President’s policies and requirements.”
Government officials, policy experts, and nonprofits are still trying to work out exactly what the order would apply to and what would be exempt. While it states that Medicare and Social Security benefits and assistance provided directly to individuals should not be impacted, it does not specifically mention an exclusion for Medicaid, and states are reporting that they are locked out of the health insurance program. It is possible that federal housing assistance and disaster relief programs could also be disrupted, impacting tens of millions of Americans.
Sen. Bernie Sanders (I-Vt.), called the order “blatantly unconstitutional.”
“Our Founding Fathers explicitly gave Congress the power of the purse,” Sanders said in a statement. “Under our system of checks and balances, no president has the right to choose which laws to follow and which laws to ignore.”
The memo says the Trump administration can provide exemptions “on a case-by-case basis.” Here are some of the programs that could be immediately impacted.
Medicaid benefits
While Social Security and Medicare payments were exempted from the order, Medicaid was not named in it. States including Illinois say they have been locked out of their accounts.
Medicaid provides health insurance for around 80 million children, pregnant women, low income adults, seniors, and disabled people across the country. The Centers for Medicare and Medicaid Services did not immediately respond to a request for comment about whether or not it was impacted by the freeze.
Medicaid is the largest source of federal funding states receive, and any disruption “will cause chaos and disrupt access to needed care,” Joan Alker, executive director of the Georgetown University Center for Children and Families, said in a statement, adding that “the mere suggestion of such a pause will cause panic.”
A follow-up memo released by OMB Tuesday said “mandatory programs” including Medicaid would not be disrupted. But state portals were down.
Federal student loans
Owing to the vague nature of the order, many students relying on federal student aid expressed confusion and fear that federal student loans and Pell grants would be impacted by the freeze.
But the U.S. Department of Education said Tuesday that the pause does not apply to federal student loans or Pell grants.
“The funding pause directed by the Jan. 27, 2025, OMB memorandum only applies to discretionary grants at the Department of Education,” said Madi Biedermann, spokesperson for the U.S. Department of Education. “These will be reviewed by department leadership for alignment with Trump administration priorities.”
The Student Borrower Protection Center, a nonprofit that advocates for student loan borrowers, said in a statement Tuesday that despite the administration saying student loans would not be affected by the order, it will still harm working families from “suburban, rural, and urban communities alike.”
“Regardless of these updates, it is clear that policymakers must secure firm commitments from Trump administration nominees that they will reject these attacks on working families,” the press release reads.
Community health centers
Sanders pointed to community health centers, which provide primary health care to more than 30 million Americans and rely on federal funds.
Special Supplemental Nutrition Program for Women, Infants, and Children
WIC provides nutrition assistance to pregnant mothers and babies and could be impacted, says Sanders.
Low Income Home Energy Assistance Program
This program provides assistance for heating and cooling bills to millions of seniors and families with children and could be impacted, according to Sanders.
This story has been updated with news of an order temporarily blocking the spending freeze.
