What can a temporary pause on federal financial assistance mean for higher education?
In late January, the Trump Administration ordered a temporary pause on all federal financial assistance, which included funding to higher education institutions via grants and loans. The freeze was not intended to affect Pell Grants, student loans and Federal Work-Study.
Here are some highlights of what has happened since the freeze was initiated.
- The National Institutes of Health and the National Science Foundation have canceled meetings to review grants, causing significant uncertainty and disruption in daily operations at higher education institutions. This raises concerns about the stability of federal funding in the long term.
- The Office of Management and Budget has directed all federal agencies to pause the grants and loans they oversee.
- The funding freeze has sparked two legal battles.
- The first, in Rhode Island, saw 22 state attorneys general suing to block the freeze on funds allocated to their states. This lawsuit was successful, and the freeze was prevented for those funds.
- The second case, in DC, involved the National Council of Nonprofits and other plaintiffs arguing that the freeze violated the Appropriations Clause and the Administrative Procedure Act. The judge ruled in favor of the plaintiffs, allowing the disbursements to resume.
- On February 25, a federal court judge ordered a preliminary injunction to block a further funding freeze. The injunction is in place indefinitely while the case plays out.
From the federal funding freeze, there are a few outcomes that could occur for higher education institutions. Some of these include:
- Shifting funding to an industry-sponsored process. Institutions can diversify their funding sources by having industry-sponsored funding for research or programming as a way to keep funding flowing into their institutions.
- However, institutions should be careful of accepting industry-sponsored funding as it may lead to unintended consequences that could affect the academic integrity of the institution.
- Requiring institutions to do the same amount with less, possibly driving up tuition for students.
- Removing programs the institutions can no longer support. With a lack of funding, institutions may be faced with the hard decision to no longer support programs—academic or social—within their university to maintain their overall budget.
- Enacting a hiring freeze and budget cuts. Institutions may also be forced to implement a hiring freeze or instill budgeting cuts to maintain the level or service to their students.
Higher education institutions can take several steps to reduce the potential impact of decreased federal funding such as:
- Assess the institution’s exposure to the freeze by understanding how it may affect the institution’s ability to fund programs.
- Communicate with contacts within the federal agencies to understand the standing of institution-specific grants.
- Advocate for policy changes by working with other higher education institutions to lobby for change at the federal level.
- Collect funding by accelerating the obligation and/or disbursement process where feasible.
- Participate in webinars or town halls to stay up to date on the most current information.
- Continue to focus on current student retention and success.
About Schneider Downs Higher Education Services
The Schneider Downs Higher Education industry group is a dedicated team of experienced professionals specializing in serving institutions from high schools to universities. Our experience in audit and assurance, tax advisory, technology and data and more allow our professionals to stay ahead of the latest trends, developments and challenges within the education sector and provide timely and practical solutions to our clients.
To learn more, visit our Higher Education Industry Group page.
