Trump Administration Rescinds Federal Grant and Loan Freeze After Widespread Backlash

President Donald Trump's administration rescinded a sweeping freeze on federal grants and loans on Wednesday, just one day after it was issued, following intense criticism. A memo obtained by NBC News confirmed the reversal, which was acknowledged by a senior administration official.

The freeze, which caused confusion and disruptions across Washington, had been temporarily blocked by a federal district judge on Tuesday evening.

Issued by the Office of Management and Budget (OMB) on Monday night, the directive ordered federal agencies to "temporarily pause all activities related to the obligation or disbursement of all Federal financial assistance, and other relevant activities, including but not limited to foreign aid, nongovernmental organizations, DEI programs, gender ideology, and the Green New Deal." The pause was intended to allow the administration to review which programs aligned with Trump's political agenda.

Although Social Security, Medicare, and direct payments to individuals were reportedly exempted, the vague wording of the memo created uncertainty about which programs would be impacted.

Trump Administration Rescinds Federal Grant and Loan Freeze After Widespread Backlash

Throughout the day, the White House attempted to clarify the directive, but by then, confusion had already spread, with reports of individuals and organizations struggling to access federal aid systems. Nonprofits focused on healthcare and homelessness, for example, reported being unable to withdraw funds, and Medicaid payment portals were temporarily unavailable.

Sen. Patty Murray (D-Wash.) called the decision a “major victory” for the American people, attributing it to widespread public outcry. “Real people made a difference by speaking out," she said in a statement on Wednesday. “However, the Trump administration's actions caused harm and chaos, affecting millions, and the effects are still ongoing."

Democracy Forward, a progressive nonprofit, had filed a lawsuit against OMB, leading Judge Loren AliKhan to issue the temporary block. Skye Perryman, CEO of Democracy Forward, condemned the administration’s actions. "We condemn the Trump-Vance administration’s harmful and callous approach, which unleashed chaos and harm on the American people," she said. "Our legal team will continue to take swift action to protect Americans and ensure that federal funding is restored."