Trump Administration Sued Over Federal Funding Freeze on Loans, Grants

What Happened?

A lawsuit was filed Tuesday challenging the sweeping measures by President Donald Trump's administration to pause federal loans and grants beginning Tuesday at 5 p.m.

The National Council of Nonprofits, the American Public Health Association, the Main Street Alliance, and the New York-based group SAGE filed the suit in the U.S. District Court in Washington, D.C.

The four groups representing nonprofits, small businesses, and public health professionals claim the actions imposed by the Office of Management and Budget are illegal.

They are seeking to temporarily block the funding freeze that could heavily impact millions nationwide.

‘Federal agencies must temporarily pause all activities related to obligation or disbursement of all federal financial assistance,’ the White House informed in a released memo late Monday.

The memo added that the temporary pause will provide the administration time to review agency programs and determine the best uses of funding based on the president’s priorities.

Aid to nonprofits, universities, and even small business loan seekers could bear the burden as a result.

President and CEO Diane Yentel of the National Council of Nonprofits issued a statement that called the order a ‘potential 5-alarm fire for nonprofits.’

‘From pausing research on cures for childhood cancer to closing homeless shelters, halting food assistance, reducing safety from domestic violence, and shutting down suicide hotlines, the impact of even a short pause in funding could be devastating and cost lives,’ Yentel said.

U.S. Senator Chuck Schumer took to social media Tuesday and said, ‘The blast radius of this terrible decision is virtually limitless, and its impact will be felt over and over again.’

Why it Matters

The White House noted that in Fiscal Year 2024, more than $3 trillion of the nearly $10 trillion the government spent went to federal financial assistance for grants and loans.

Last week, the State Department ordered a freeze on U.S. foreign assistance that has reportedly impacted places like Ukraine actively in the war against Russia.

Many have also raised concern amid the massive workplace changes following Trump's executive orders that required all federal employees in diversity, equity, and inclusion roles to be placed on paid leave.

Billionaire Elon Musk, tasked with co-leading efforts of the Department of Government Efficiency (DOGE), has focused on these areas as beginning cost-cutting measures to address the nation's debt deficit.

Trump's White House budget director nominee, Russell Vought, has reportedly argued that Congress can authorize a president to spend money but can't require him to do so.

How it Affects You

The Trump administration has taken heavily questioned approaches to addressing issues around federal spending.

Hundreds of civil rights and advocacy groups are preparing to push back as the Trump administration will likely face more legal challenges, according to reports.

These actions could eventually lead the Justice Department to seek emergency relief from the Supreme Court.