Federal Grant Pause Blocked by Court—What It Means and How to Navigate the Uncertainty

Update: 01.29.2025 13:00 Eastern – OMB Memorandum M-25-13 is rescinded. If you have questions about implementing the President’s Executive Orders, please contact your agency General Counsel.

Update: 01.29.2025 11:40 Eastern – at the bottom, we have added some informative resources.

On January 27, 2025, the Office of Management and Budget (OMB) issued Memo M-25-13, placing a temporary pause on federal grant, loan, and financial assistance programs. This decision, as reported by the Associated Press, comes as part of the new administration’s broader effort to review and realign federal funding with its policy priorities.

According to the AP report, the White House has ordered federal agencies to halt the disbursement of grant funds and stop reviewing new applications while they conduct a thorough examination of all federal financial assistance programs. This review will determine whether programs continue, are modified, or are discontinued altogether. The pause was scheduled to take effect January 28, 2025, at 5 PM and is expected to last until at least February 10, 2025, when agencies must submit their evaluations.

However, just minutes before the freeze was set to take effect, U.S. District Judge Loren L. AliKhan issued an administrative stay, blocking the funding halt until Monday afternoon. This delay, resulting from a lawsuit brought by nonprofit groups that receive federal funding, provides a temporary reprieve. A court hearing is scheduled for Monday morning (February 3, 2025) to determine whether the freeze can proceed or if further legal action will halt its implementation indefinitely. (We’ll post more about this once a ruling is issued)

Who and What Is Affected?

While the funding freeze applied to all federal financial assistance programs, certain programs were more likely to be scrutinized, including:

  • Diversity, Equity, Inclusion, and Accessibility (DEIA) initiatives
  • LGBTQ-focused programs, particularly those supporting the transgender community
  • Green energy and climate-related grants (wind energy is more likely to be impacted than solar energy)
  • Foreign aid programs
  • Immigrant and refugee-focused initiatives

For organizations engaged in innovation, research, and economic development, the situation remains fluid—with ongoing legal challenges creating uncertainty around federal grant funding.

Understanding Presidential vs. Congressional Power Over Federal Funding

The President has the authority to issue executive orders directing federal agencies on spending priorities. However, Congress controls the federal budget and legally authorizes grant funding through appropriations bills. While the administration can pause or reallocate funding, it cannot permanently cancel Congressionally approved programs without legislative action.

The court ruling blocking the freeze highlights limits to executive power over funding—particularly when legally obligated grants are involved. If the lawsuit succeeds, it may set a precedent preventing further funding freezes without Congressional approval.

What Should You Do Right Now?

While the court order delays the freeze, it doesn’t eliminate the risk of future funding disruptions. Here’s what grant seekers should do:

🔍 Review Grant Language: Ensure proposals and reports align with current administration priorities. Language that directly references DEIA, climate action, or other flagged topics may require reframing to emphasize economic, security, or innovation-driven goals.

📅 Verify Deadlines and Award Status: Some NOFOs may still be pulled or delayed, and funding disbursements could be postponed depending on further legal decisions. Contact your program officer for updates.

📜 Understand Your Contract Terms: Review your award agreements to understand your rights regarding termination clauses, spending requirements, and compliance obligations.

💰 Strategically Spend Down Funds: If you have an active grant, ensure funds are obligated in compliance with federal guidelines before additional administrative restrictions take effect.

📣 Engage with Program Officers: Agency officials are navigating these changes too. Stay in communication with your grant manager to get real-time updates on program status and potential next steps.

🚀 Diversify Funding Sources: Given the uncertainty, now is the time to explore non-federal funding options, including state-level grants, corporate R&D partnerships, and private foundations. Organizations that rely solely on federal dollars could be at greater risk if certain programs are permanently cut.

Long-Term Outlook: What Happens Next?

  • February 3, 2025, Monday Morning Court Hearing: This will determine whether the funding freeze proceeds or remains blocked.
  • February 10, 2025 (This date may change after the hearing): Federal agencies must submit their evaluations to OMB, at which point we may see permanent funding shifts.
  • Potential Further Litigation: If the lawsuit progresses, it could limit executive power over federal grants moving forward.

Informative & Useful Resources

At E.B. Howard Consulting, we specialize in non-dilutive funding for innovation-focused clients. If you need guidance on navigating this policy shift, adjusting your funding strategy, or ensuring compliance, we’re here to provide guidance.

Uncertainty is temporary—preparedness is key. Let’s work together to keep your funding on track.


Ready To Take the Next Step?

We assist our clients in locating, applying for, and evaluating the outcomes of non-dilutive grant funding. We believe non-dilutive funding is a crucial tool for mitigating investment risks, and we are dedicated to guiding our clients through the entire process—from identifying the most suitable opportunities to submitting and managing grant applications.