Money Research Collective’s editorial team solely created this content. Opinions are their own, but compensation and in-depth research determine where and how companies may appear. Many featured companies advertise with us. How we make money.
Trump’s Federal Funding Freeze: What Is and Isn’t Affected, From Medicaid to Student Loans
By Pete Grieve MONEY RESEARCH COLLECTIVE
The situation is changing rapidly, but a focus on DEI, foreign aid and other concerns of the new administration provided some hints about what could be paused.
UPDATE, Jan. 29 at 2 p.m. ET: In a new memo Wednesday, the Office of Management and Budget informed agency heads that its original memo calling for a funding freeze had been rescinded.
Soon after, Press Secretary Karoline Leavitt confirmed that the White House still intends to freeze federal funding that does not align with the president’s executive actions since taking office on foreign aid, climate matters and diversity, equity and inclusion.
“This is NOT a rescission of the federal funding freeze. It is simply a rescission of the OMB memo,” Leavitt wrote in a post on X.
Below is our original story.
The Trump administration panicked consumers and sent shockwaves through government agencies when it sent a memo Monday night calling for a funding freeze to go into effect at 5 p.m. Tuesday, potentially pausing a broad range of grant, loan and aid programs that may conflict with the new president’s priorities.
But then, right before the deadline, a federal judge temporarily blocked the federal funding freeze after an emergency hearing.
Previously, the White House had instructed agency heads to temporarily pause spending in areas including “financial assistance for foreign aid, nongovernmental organizations, DEI, woke gender ideology and the green new deal,” according to the memo from Matthew Vaeth, acting director at the Office of Management and Budget (OMB).
Lawmakers, government officials, states and other stakeholders are still looking for answers about what this directive actually means. The memo noted that the government spent more than $3 trillion in federal financial assistance in fiscal year 2024, but it’s unclear how much of this spending could be paused as a result of President Donald Trump’s latest action.
Adding to the confusion: Some of the things that Trump is targeting aren’t even laws. For example, the Green New Deal was a sweeping climate resolution first introduced by Rep. Alexandria Ocasio-Cortez, D-N.Y., in 2019 that has not been passed. It’s possible the OMB memo is referring to climate actions that were included in the Inflation Reduction Act, which Congress passed in 2022, though it’s not clear.
What is impacted by Trump’s federal funding freeze?
The situation is changing rapidly, but speaking broadly, the memo’s focus on DEI (diversity, equity and inclusion), foreign aid and other concerns of the new administration provided some hints about what could be paused.
In a news conference Tuesday morning, Senate Minority Leader Chuck Schumer, D-N.Y., said the memo “has shut off billions, perhaps trillions of dollars that directly support states, cities, towns, schools, hospitals, small businesses and most of all, American families.” He went on to add that “funds for things like disaster assistance, local law enforcement, rural hospitals, aid to the elderly, food for people in need — all are on the chopping block in this new administration.”
On Tuesday, the Meals on Wheels nonprofit said it feared that funding could be affected by the freeze. Meals on Wheels is a food assistance program aimed at older Americans.
“The uncertainty right now is creating chaos for local Meals on Wheels providers not knowing whether they should be serving meals today,” Jenny Young, a spokeswoman for Meals on Wheels America, told HuffPost. “Which unfortunately means seniors will panic not knowing where their next meals will come from.”
Democrats also raised alarm later in the afternoon about impacts to Medicaid, a program that provides health insurance for low-income Americans.
Sen. Ron Wyden, D-Ore., wrote on X that “Medicaid portals are down in all 50 states following last night’s federal funding freeze,” referring to the digital systems used by health care providers to manage Medicaid payments. During a press briefing Tuesday afternoon, White House Press Secretary Karoline Leavitt was unable to say how the memo may affect Medicaid.
“The White House is aware of the Medicaid website portal outage. We have confirmed no payments have been affected — they are still being processed and sent,” Leavitt later posted on X. “We expect the portal will be back online shortly.”
What isn’t impacted by Trump’s federal funding freeze?
The initial OMB memo explicitly confirmed that Social Security and Medicare will not be affected by the freeze.
Leavitt added during Tuesday’s briefing that the Supplemental Nutrition Assistance Program (SNAP), aka food stamps, and other welfare benefits will not be impacted.
“This is not a blanket pause on federal assistance and grant programs,” she said. “Assistance that is going directly to individuals will not be impacted by this pause.”
As far as student loans, after some initial confusion, the Department of Education confirmed that federal Pell Grants and direct loans will not be impacted, according to multiple reports.
How long will the funding pause last?
A Q&A document from the OMB noted that it is working with agencies to quickly approve certain programs and said “a pause could be as short as a day.”
Leavitt said during the press briefing that “it is a temporary pause” while the administration is “reviewing the federal funding that has been going out the door.”
More from Money:
Home Prices Are Back on the Rise — Even in ‘Affordable’ Cities
Can Trump Really ‘Demand’ Interest Rates Go Down?
9 States That Still Tax Social Security Benefits
Pete Grieve is a New York-based reporter who covers personal finance news. At Money, Pete covers trending stories that affect Americans’ wallets on topics including car buying, insurance, housing, credit cards, retirement and taxes. He studied political science and photography at the University of Chicago, where he was editor-in-chief of The Chicago Maroon. Pete began his career as a professional journalist in 2019. Prior to joining Money, he was a health reporter for Spectrum News in Ohio, where he wrote digital stories and appeared on TV to provide coverage to a statewide audience. He has also written for the San Francisco Chronicle, the Chicago Sun-Times and CNN Politics. Pete received extensive journalism training through Report for America, a nonprofit organization that places reporters in newsrooms to cover underreported issues and communities, and he attended the annual Investigative Reporters and Editors conference in 2021. Pete has discussed his reporting in interviews with outlets including the Columbia Journalism Review and WBEZ (Chicago's NPR station). He’s been a panelist at the Chicago Headline Club’s FOIA Fest and he received the Institute on Political Journalism’s $2,500 Award for Excellence in Collegiate Reporting in 2017. An essay he wrote for Grey City magazine was published in a 2020 book, Remembering J. Z. Smith: A Career and its Consequence.