On January 27, 2025, President Trump's Office of Management and Budget (OMB) issued a memorandum to the heads of all executive departments and agencies, ordering a freeze of federal grants. The memorandum states, in relevant part:
[T]o the extent permissible under applicable law, Federal agencies must temporarily pause all activities related to obligation or disbursement of all Federal financial assistance, and other relevant agency activities that may be implicated by the executive orders, including, but not limited to, financial assistance for foreign aid, nongovernmental organizations, DEI, woke gender ideology, and the green new deal.
The freeze applied to "(i) all forms of assistance listed in paragraphs (1) and (2) of the definition of this term at 2 CFR 200.1, and (ii) assistance received or administered by recipients or sub-recipients of any type except for assistance received by individuals." Paragraphs (1) and (2) include "[a]ssistance that recipients or sub-recipients receive or administer in the form of" grants, cooperative agreements, and direct appropriations, as well as loans and loan guarantees.
Scope and Impact
The scope of the freeze is uncertain. The language of the memorandum expressly excludes applications to Social Security and Medicare benefits, and the Department of Education stated that the freeze would not affect Pell grants and other educational grants directed at individual students. Ron Lieber and Tara Siegel Bernard,The Federal Funding Pause Does Not Apply to Student Loans and Pell Grants, New York Times (Jan. 28, 2025).
It is unclear to what degree the freeze would impact research funding. In response to the directive, some government agencies, including the National Science Foundation (NSF) (responsible for distributing research funding to universities), froze their grant reviews. See National Science Foundation freezes grant review in response to Trump executive orders, NPR (Jan. 27, 2025), https://www.npr.org/sections/shots-health-news/2025/01/27/nx-s1-5276342/nsf-freezes-grant-review-trump-executive-orders-dei-science.
Requirements and Oversight
The memorandum also required agencies to:
(i) Assign responsibility and oversight to a senior political appointee to ensure Federal financial assistance conforms to Administration priorities;
(ii) Review currently pending Federal financial assistance announcements to ensure Administration priorities are addressed, and, subject to program statutory authority, modify unpublished Federal financial assistance announcements, withdraw any announcements already published, and, to the extent permissible by law, cancel awards already awarded that conflict with Administration priorities, and;
(iii) Ensure adequate oversight of Federal financial assistance programs and initiate investigations when warranted to identify underperforming recipients, as well as address identified issues up to and including cancellation of awards.
The memorandum's directive did not impose reporting obligations on funding recipients. However, it appears that academic institutions would experience greater oversight regarding their receipt of federal funds.
Legal and Administrative Actions
Before the freeze was set to take effect on Tuesday, January 28, 2025, however, the Federal District Court of the District of Columbia ordered an administrative stay of the funding freeze until February 3, 2025. The Court imposed the stay in order to consider a Temporary Restraining Order application against the freeze.
Almost immediately following the administrative stay, the Administration officially rescinded the memorandum. However, later the same day, White House Press Secretary Karoline Leavitt wrote, "This is NOT a rescission of the federal funding freeze. It is simply a rescission of the OMB memo. Why? To end any confusion created by the court's injunction. The President's EO's on federal funding remain in full force and effect and will be rigorously implemented."See@PressSec, https://x.com/PressSec/status/1884672871944901034(Jan. 29, 2025).
The Administration itself has not provided further guidance at this time. Although it has now filed a motion in the District Court noticing the memorandum's rescission, it will nevertheless "submit a written filing consistent with the current briefing schedule." The District Court is expected to render an opinion on the freeze on Monday, February 3, 2025.
It will be a challenge for institutions to navigate the quickly evolving developments and uncertainty surrounding this freeze, among other recent executive actions. To the extent that colleges and universities are not already doing so, we recommend forming a dedicated working group tasked with evaluating these developments, recommending necessary next steps and risk mitigation, and communicating with the campus about the potential impact of these developments. The specific stakeholders for any such working group will vary by campus. Still, it is likely prudent to include government relations (and outside lobbying firms as appropriate), the general counsel's office (and outside counsel as appropriate), communications, grants/contracts administration, and university senior leadership. Steptoe will be monitoring these developments and issuing client alerts on an ongoing basis and is available to assist if helpful at any point.
February 4, 2025 Update:
On Friday, January 31, Judge McConnell of the United States District Court for the District of Rhode Island entered a temporary restraining order suspending the federal funding freeze. Soon after, on Monday, February 3, Judge AliKhan of the United States District Court for the District of Columbia likewise granted a temporary restraining suspending the freeze. Both courts held that the plaintiffs had shown a likelihood of success on the merits and found that the cases were not rendered moot by the White House's rescission of the memorandum. The DC court's opinion notes that despite the rescission, several entities remain unable to access federal funding. The Administration has yet to confirm when funding to all beneficiaries will resume.
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