Trump Halts Trillions In Government Spending on Loans and Grants—What You Need to Know

An order by President Donald Trump could freeze potentially trillions of dollars of grants and loans, but Congressional leaders and legal experts say the move is against the law. 

The White House Office of Management and Budget issued a memo to federal agencies Monday directing them to pause some of the $3 trillion in grants and loans the federal government awards each year, according to documents obtained by news outlets, including the New York Times.

The sweeping memo exempted “assistance provided directly to individuals,” including Social Security and Medicare payments, but did not otherwise specify which federal payments could continue. Opponents, including Senate minority leader Chuck Schumer, a Democrat from New York, said Trump does not have the power to block federal spending already authorized by Congress in the budget.

The pause was set to take effect at 5 p.m. Tuesday. However, a federal judge temporarily blocked the implementation minutes before the order could take effect.

A Freeze Could Have Economic Impacts

The memo directs agencies to align their spending with Trump’s policy priorities, including “ending ‘wokeness'” and stopping “Marxist equity, transgenderism, and green new deal social engineering policies.”

Freezing federal funding could affect large swathes of the economy that heavily rely on it. The federal government sends trillions to state and local governments and nonprofits for education, housing, healthcare, medical research, child care, transportation, and other programs. The government also sends billions to farmers each year in the form of loans and subsidies.

As of Tuesday, Federal agencies were grappling with which programs to continue. The Department of Education told Investopedia that student loans and Pell grants would continue since they are given directly to individuals.

The order reignites a long-running conflict, going back at least to Thomas Jefferson, over whether the president can refuse to spend money that Congress has allocated for certain purposes.

A 1974 law passed in the aftermath of the Watergate scandal gives Congress the power to review any money allocated by Congress that the White House decides not to spend. Under the law, the money must be spent after 45 days unless Congress specifically approves of the impoundment.

Opponents Say Order Is Illegal

Democrats and some legal experts blasted the memo.

David A. Super, a law professor at Georgetown, said the directive was “clearly unlawful” in a post on social media platform X.

“It may breach contracts and various federal laws, but if it does anything, it violates the Impoundment Control Act,” he wrote.

In an additional communication from the Office of Management and Budget after the original memo was sent, the White House argued that because it is a temporary pause, it is not an impoundment subject to that law.

Schumer said the move would jeopardize billions in community grants and financial support for individuals.

“Congress approved these investments and they are not optional; they are the law,” he said in a statement. “It will mean missed payrolls and rent payments and everything in between: chaos for everything from universities to non-profit charities.”

Update, Jan. 28, 2025: This article has been updated to include information provided in an additional briefing from the Office of Management and Budget and a judge’s ruling.