A White House memo ordering a broad freeze on federal grants and loans by 5 p.m. Tuesday has ordinary Americans who depend on such aid, as well as seasoned budget experts, scratching their heads.
The initial freeze memo was vague in its wording, causing chaos and confusion within federal assistance programs, at nonprofits and among individuals contemplating the implications of having their funding pulled.
“If this was being undertaken pursuant to the executive orders on DEI, why would the administration issue such broad, unclear and confusing directions?” said Tad DeHaven, a policy analyst on federal and state economic and fiscal policy issues for the Cato Institute, a Libertarian think tank in an interview with CBS MoneyWatch.
“I don’t really understand it, and I think even people who are in positions of power don’t really understand it,” Wendy Edelberg, director of The Hamilton Project at Brookings, an economic think tank told CBS MoneyWatch.
The initial memo indicated that Social Security and Medicare programs would not be covered by the funding freeze. Additional guidance released Tuesday specified that “any program that provides direct benefits to Americans is explicitly excluded from the pause.”
“In addition to Social Security and Medicare, already explicitly excluded in the guidance, mandatory programs like Medicaid and SNAP will continue without pause,” the updated guidance says.
The memo adds that funds for small businesses, farmers, Pell grants, Head Start, rental assistance and other similar programs are also exempt.
Even if the confusion is resolved within a matter of weeks, and the order is narrowly tailored to take aim at a couple of programs, it will still have serious economic implications for the millions of Americans who receive federal assistance.
“If it’s resolved quickly, the aggregate economic effects for the first quarter will be modest, but it will matter a whole lot to people on the other side of these expected payments,” Edelberg said. “It could be the difference between having a job and not, getting evicted or affording food — and the economic numbers won’t fully reflect how individuals are going to feel this.”
Here’s what we know about who the freeze effects.
Will I still receive SNAP benefits?
The freeze does not apply to all federal financial assistance, according to an Office of Management and Budget (OMB) memo Tuesday outlining what kinds of funding the freeze covers.
In the memo, the OMB indicates that Supplemental Nutrition Assistance Program (SNAP) benefits are excluded, specifying that “… any program that provides direct benefits to Americans is explicitly excluded from the pause and exempted from this review process.”
“In addition to Social Security and Medicare, already explicitly excluded in the guidance, mandatory programs like Medicaid and SNAP will continue without pause,” the memo reads.
SNAP serves roughly 41 million Americans, who are nonetheless concerned that the program could be interrupted and that they could see delays in disbursements.
While the program appears to be exempt from the freeze, “You are still going to be really worried in the near term whether the federal government is going to make good on those promises,” Edelberg said. “And that kind of uncertainty is not good for the economy.”
Are meals for seniors affected?
The Older Americans Act Nutrition Program, a federal program that funds community-based senior nutrition programs like Meals on Wheels, through grants, could be affected.
If the order includes the Older Americans Act, it “would halt service to millions of vulnerable seniors who have no other means of purchasing or preparing meals,” Meals on Wheels said in a statement to CBS MoneyWatch. “The lack of clarity is creating chaos for Meals on Wheels providers not knowing whether they should be serving meals today,” it added.
Housing assistance at risk
The OMB memo added that rental assistance and other similar programs will not be paused. Still, the National Low Income Housing Coalition (NLIHC) issued a statement Tuesday maintaining that it believes Department of Housing and Urban Development (HUD) programs could be covered by the freeze.
“Even a short pause in funding could cause significant harm to low-income families and their communities,” NLIHC Interim President and CEO Renee Willis said. “The longer the freeze continues, the greater the risk that low-income households receiving federal rental assistance could face eviction, and in the worst cases, homelessness — homeless shelters may be forced to close their doors, and nonprofit organizations may have to lay off staff.”
Head Start panic
The memo also indicated that Head Start, a preschool program serving nearly 800,000 low-income children that receives federal health funds, is not impacted by the funding pause.
But the National Head Start Association (NHSA) said that the OMB memo has already “created panic among Head Start grant recipients who are currently not able to draw down any funds.”
“While we understand that this is an evolving story, this disruption, at best, will slow down Head Start agencies’ ability to pay hundreds of thousands of staff, contractors, and small businesses who support Head Start operations in every corner of the country,” NHSA’s Executive Director Yasmina Vinci said in a statement. “At worst, this means that hundreds of thousands of families will not be able to depend on the critical services and likely will not be able to work.”
Medicaid
Despite the updated guidance issued Tuesday stating that programs including Medicaid are excluded form the pause, state Medicaid programs on Tuesday said they were locked out of the Department of Health and Human Services system used to track and disburse their money.
The Payment Management Services web portal displayed a message reading: “Due to Executive Orders regarding potentially unallowable grant payments, PMS is taking additional measures to process payments. Reviews of applicable programs and payments will result in delays and/or rejections of payments.”
The National Association of Medicaid Directors is seeking further clarity on the interruption from the White House, according to a spokesperson.
Will it affect student loans?
The federal funding freeze does not apply to student loans and Pell grants, according to the Department of Education.
The funding pause “only applies to discretionary grants at the Department of Education,” DOE spokesperson Madi Biedermann said in a statement to CBS MoneyWatch.
Still, families and students are anxious that funds from programs they depend on will evaporate under President Trump.
“Any kind of freeze to federal financial aid across the board is incredibly harmful to working families just trying to pay for college,” Aissa Canchola Bañez, policy director at Student Borrower Protection Center, an advocacy group working to end the student debt crisis, told CBS MoneyWatch. Uncertainty about the order is fueling chaos and confusion, she added. “Lots of questions remain about what the freeze applies to and what programs it does not.”
She added that many student borrowers rely on different kinds of assistance to cover costs beyond tuition.
“There are other types of federal work-study grants that go directly to colleges and universities, and supplemental education opportunities that go to some of the lowest-income students. People really rely on federal financial aid, and you could see families having to drop out of college or figure out how they will cover this gap,” she said.
contributed to this report.
