(NewsNation) — The Trump administration is temporarily pausing grants, loans and other federal financial assistance starting Tuesday, an order that’s set off confusion among the many groups that depend on federal funds.
The directive from the acting director of the Office of Management and Budget (OMB), Matthew Vaeth, was sent out Monday instructing federal agencies to temporarily pause “all activities related to obligation or disbursement of all Federal financial assistance.”
Vaeth’s memo was light on specifics but clarified that federal assistance to individuals, like Social Security and Medicare, would not be impacted. Instead, the order is intended to make sure federal funding is aligned with Trump’s recent executive orders.
Trump administration freezes nearly all federal loans and grants
“The use of Federal resources to advance Marxist equity, transgenderism, and green new deal social engineering policies is a waste of taxpayer dollars that does not improve the day-to-day lives of those we serve,” Vaeth wrote.
The pause, set to take effect Tuesday at 5 p.m. ET, could affect trillions of dollars, potentially disrupting health care research, education funding and other such programs.
The memo calls on agencies to submit “detailed information on any programs, projects or activities subject to this pause” to OMB by February 10.
Here’s what to know.
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Who will be affected by the pause?
The funding pause could affect trillions of dollars, but it’s still unclear which programs will be impacted and how.
Vaeth’s memo is full of carve-outs and says OMB may grant exceptions that allow Federal agencies to “issue new awards” or “take other actions” on a “case-by-case basis.”
“The vague and contradictory language makes it hard to know if funding is imperiled for public schools, community health centers, state and local law enforcement, veterans’ housing, health care through Medicaid, public services on tribal lands, etc,” wrote Sharon Parrott, president of the Center on Budget and Policy Priorities, a left-leaning think tank.
In fiscal year 2021, $2.8 trillion in federal funding was distributed to states, communities, tribal governments and other recipients using Census Bureau data.
Some of the top federal assistance programs funded health care, nutrition, highways, housing, school lunches, child care and COVID-19 assistance.
The federal budget provides about 30% of state revenue, making it the single largest source of revenue in many states, according to the Federal Funds Information for States (FFIS).
Will Social Security and Medicare be impacted?
The memo says that federal assistance to individuals won’t be affected, meaning Social Security, Medicare, food stamps and other such programs won’t change.
“Nothing in this memo should be construed to impact Medicare or Social Security benefits,” Vaeth wrote.
What about student loans?
The Education Department said the temporary pause does not impact assistance received directly by individuals, therefore students who rely on federal financial aid to cover tuition and other costs aren’t expected to see any disruptions.
“Title IV, HEA funds that are provided to individual students, such as Federal Pell Grants and Direct Loans, are not impacted by yesterday’s guidance,” Madi Biedermann, spokesperson for the U.S. Department of Education, told NewsNation.
More than 40 million Americans have federal student loans, and about 7 million students receive Pell Grants each year in the United States.
The Association of American Universities (AAU), composed of roughly 70 research universities, told NewsNation it’s still working to assess the potential impact on research funding.
Will the pause go into effect?
The pause is scheduled to take effect at 5 p.m. ET on Tuesday, but a coalition of state attorneys general plans to file suit to block the order.
New York Attorney General Letitia James is leading the charge and plans to ask a Manhattan federal court to intervene.
“My office will be taking imminent legal action against this administration’s unconstitutional pause on federal funding,” James wrote on social media Tuesday.
Other states joining the suit are California, Illinois, New Jersey, Rhode Island and Massachusetts, according to The New York Times.
Massachusetts Attorney General Andrea Joy Campbell, a Democrat, called Trump’s directive “a reckless abuse of power.”
“This will hurt families. We’re exploring prompt action to stop it,” Campbell said on X.
This is a developing story that will continue to be updated.
