Trump Federal Funding Freeze Causes FAFSA Panic

President Donald Trump announced an executive directive Jan. 27 stopping the distribution of all federal grants and loans, The Associated Press reported.

The abrupt announcement caused “chaos” throughout the country Tuesday. Federal employees, companies and contractors were left unsure about which programs — from disaster relief to Meals on Wheels — were being stopped or suspended under the directive’s broad language, The AP reported.

Also called into question by the memorandum was the status of the Free Application for Federal Student Aid, more commonly known as FAFSA.

The policy was announced Monday morning through an internal memo at the Office of Management and Budget, issued by Acting Director Matthew Vaeth to comply with Trump executive orders.

The memo claimed the wide-reaching cut was meant to target programs funding “wokeness” as well as “Marxist equity, transgenderism, and green new deal social engineering.”

After the first memo circulated, government officials from state governors to local school boards braced for immediate shortfalls, with major concerns that essential programs like FAFSA, Social Security, Medicare and food aid through the Supplemental Nutrition Assistance Program would have their funding indefinitely paused. 

To address the uncertainty surrounding the funding stoppage, the Trump administration released a second memorandum Jan. 28 partially clarifying and walking back the broadest parts of the freeze.

Part of the subsequent memorandum provided more detail to the halt, exempting FAFSA, Social Security and Medicare — among others — from the imminent impoundment of federal funds.

Vaeth’s order was scheduled to take effect at 5 p.m. EST Jan. 28, before an emergency pause from a federal judge delayed it for seven days following separate lawsuits launched by Democratic officials and a group of nonpartisan nonprofit organizations, The AP reported.

Federal District Judge Loren AliKhan issued an administrative stay for the policy in response to its ambiguity and questions over the size, duration and number of funding halts the president had ordered, The AP reported.

The directive mandates a “review” of “all federal financial assistance programs” and said federal agencies “must temporarily pause all activities” related to providing federal funds. While it allows for the OMB to carve out exceptions to the funding stoppage, the initial memorandum didn’t name any.

Vaeth, the official who issued the policy, is currently serving in the role of acting director of the OMB, while Trump’s nominee for the important post — controlling spending within the executive branch — still awaits senate confirmation, The AP reported.

Trump’s nominee for permanent OMB head, Russell Vought, served in the role during the president’s first term in office and was a co-author of the Heritage Foundation’s controversial Project 2025.

By midday Jan. 28, all 50 states announced outages on federal Medicaid websites and have begun to prepare for layoffs and freezes across the government.

While programs providing “direct benefits to Americans” were exempted from the funding seizure by the second memorandum, The AP reported, groups from across the higher education industry have continued to sound alarm bells about what the move will mean for students and universities.

With 72% of university students receiving some type of federal aid, averaging $14,000 a student, according to The National Center for Education Statistics, changes to federal funding continue to represent a major concern for American universities. 

Even though FAFSA has been exempted from the policy, the chaos of the interruption before the Trump administration’s clarification and the remaining effects of the policy — which halt funding for grants to universities and research labs — has left university administrations “scrambling” to continue student programs, The AP reported.
As the lawsuits against the policy continue, legal scholars have labeled the moves to impound funds already allocated by Congressional action as violations of the constitution and federal law, according to Reuters.