July 14 Federal Update: President Trump Signs H.R. 1, The Federal Budget Bill, Into Law 

H.R. 1 is expected to have profound and lasting effects on the social service sector. Among the most consequential changes are deep funding cuts to Medicaid, along with new, burdensome requirements that make it more difficult for people to enroll, re-enroll, and maintain coverage. According to an analysis from the Congressional Budget Office, these changes are projected to result in the loss of Medicaid coverage for 16 million individuals by 2034. 

The bill also imposes new eligibility requirements for the Supplemental Nutrition Assistance Program (SNAP) and ties state funding to administrative error rates, which is expected to further restrict access. Information from the Congressional Budget Office estimates 3 million individuals will lose access to SNAP as a result. 

Medicaid and SNAP are foundational to our nation’s safety net, protecting the health and well-being of millions. Reduced funding and access will directly harm individuals and families, while placing an unsustainable burden on the social service organizations that support them. 

For further information, Social Current has published a brief overview, highlighting the most impactful provisions of the bill; a detailed summary, which details expected impacts to the sector; and the recording of the July 10 webinar about the bill. 

Loans Enrolled in the SAVE Plan Will Begin Accruing Interest Aug. 1 

The U.S. Department of Education recently announced that interest accrual for borrowers with loans in the Saving on a Valuable Education (SAVE) Plan will restart August 1. 

The Department announced that it will begin direct outreach July 10 to the nearly 7.7 million borrowers enrolled in the SAVE Plan, with instructions on how to move to a legal repayment plan and begin making qualifying payments. 

The announcement arrives as student loan policies are expected to change rapidly due to H.R. 1, the federal budget bill. H.R. 1 phases out Pay as You Earn (PAYE), Saving on a Valuable Education (SAVE), and the Income-Contingent Repayment (ICR) Plan. Borrowers will need to choose either the Repayment Assistance Plan, a new income-based plan, or the amended Income-Based Repayment Plan between July 2026 and July 2028.  

Social Current’s detailed summary of H.R. 1 offers key information regarding the Repayment Assistance Plan and the amended Income-Based Repayment Plan.

Expected Changes to Public Student Loan Forgiveness Eligibility 

The U.S. Department of Education recently concluded its negotiated rulemaking session to ensure employers involved with the Public Service Loan Forgiveness Program are not engaging in activities with a substantial illegal purpose. 

The Department made 15 substantive changes to the regulatory language according to feedback from the committee. Although the Department has not publicly released the changes, it will now draft a Notice of Proposed Rulemaking in the Federal Register for public comment, which is expected to be released before November 1. 

HHS and the Department of Agriculture Amend Program Eligibility for Immigrants Lacking Permanent Legal Status

The U.S. Department of Health and Human Services rescinded a 1998 interpretation of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA). 

The Department claimed the act improperly allowed immigrants lacking permanent legal status to access certain social service programs. HHS’ revised policy will take effect immediately upon publication in the Federal Register.  

Key programs that will be formally classified as federal public benefits and have restricted eligibility include:

• Certified Community Behavioral Health Clinics 
• Community Mental Health Services Block Grant 
• Community Services Block Grant  
• Head Start 
• Mental Health and Substance Use Disorder Treatment, Prevention, and Recovery Support Services Programs administered by the SAMHSA 
• Projects for Assistance in Transition from Homelessness Grant Program 
• Substance Use Prevention, Treatment, and Recovery Services Block Grant 
• Title IV-E Educational and Training Voucher Program 
• Title IV-E Kinship Guardianship Assistance Program 
• Title IV-E Prevention Services Program 

The Department of Health and Human Services has published a complete list of programs. 

The departments of Education and Labor have issued similar notices.

Similarly, the Department of Agriculture released the following programs to be formally classified as federal public benefits and restrict eligibility: 

• The Supplemental Nutrition Assistance Program 
• Food Distribution Program on Indian Reservations  
• The Emergency Food Assistance Program  
• Commodity Supplemental Food Program 
• Special Supplemental Nutrition Program for Women, Infants, and Children  
• WIC Farmers’ Market Nutrition Programs 
• Senior Farmers’ Market Nutrition Programs 
• National School Lunch Program 
• School Breakfast Program 
• Child and Adult Care Food Program 
• Fresh Fruit and Vegetable Program 
• Special Milk Program 
• Summer Food Service Program 
• Summer EBT 
• Disaster Assistance 

ACF Opens State Applications for Redesigned Welfare Pilot Programs 

The Administration for Children and Families released a request for applications for the Temporary Assistance for Needy Families pilot.  

The pilot will choose up to five states to test innovative approaches aimed at promoting work and reducing government dependency. According to ACF, the redesigned pilot reflects the Trump Administration’s commitment to “reshaping welfare programs to encourage employment, personal responsibility, and strong families.”  

The application will allow states to propose alternative performance measures that prioritize employment outcomes, earnings progression, and reduced reliance on Temporary Assistance for Needy Families (TANF), Medicaid, and Supplemental Nutrition Assistance Program (SNAP) benefits — rather than the current work participation rates. 

The pilot program will operate for six years, with the first year dedicated to establishing baseline data and negotiating performance targets. Applications are due August 15, 2025. The pilot program for the selected states will begin on October 1, 2025.   

Children’s Bureau Issues Updated Guidance 

The Children’s Bureau stressed the importance of complying with the executive order, Ending Illegal Discrimination and Restoring Merit-based Opportunity, through recently issued guidance. The Bureau strongly encouraged all recipients of entitlement or formula awards funded by titles IV-B or IV-E of the Social Security Act or the Child Abuse Prevention and Treatment Act to review all plans, services, strategies, and expenditures under these programs, including those made by subrecipients or contractors, to ensure that they do not support diversity, equity, and inclusion initiatives or any other initiatives that discriminate on the basis of race, color, religion, sex, national origin, or another protected characteristic. 

Senate Agriculture Committee Approves Appropriations Bill

On July 10, the Senate Agriculture Committee unanimously passed its agriculture appropriations bill, the Fiscal Year 2026 Agriculture, Rural Development, Food and Drug Administration (FDA), and Related Agencies Appropriations Act. The bill contains notable changes from the previously passed House version, increasing funding for the Women, Infants, and Children (WIC) Program by $603 million and the Commodity Supplemental Food Program (CSFP) by $36 million. It maintains the full Cash Value Benefit for fruits and vegetables. The bill also fully funds all mandatory nutrition programs for fiscal year 2026, including SNAP, School Lunch Program, School Breakfast Program, and Summer EBT.

The Senate Agriculture Committee also allocated $1.715 billion for rental assistance, an increase of $73 million over fiscal year 2025. It also continues rural housing preservation efforts, including the decoupling pilot program, multifamily housing technical assistance, and preservation financing.

For further information, Vice Chair Patty Murray (D-Wash.) issued a summary of key provisions within the bill.

Sector Updates from the Judiciary 

Supreme Court Upholds Agency Workforce Reductions 

The Supreme Court lifted a lower-court order that temporarily prevented the Trump Administration from laying off tens of thousands of federal workers.  

The nation’s largest union of federal workers, the American Federation of Government Employees, filed the lawsuit alongside 11 nonprofit organizations and 6 local governments. 

The plaintiffs alleged that in issuing the executive order, Implementing the President’s “Department of Government Efficiency” Workforce Optimization Initiative, the Trump administration circumvented congressional approval for its reorganization plans.  

Solicitor General Sauer claimed that the president does not require special permission from Congress to exercise the essential presidential power of overseeing federal agencies. He additionally highlighted the directive to agencies to ensure that they do not eliminate any of the functions that statutes passed by Congress require.  

In issuing their verdict, the justices determined that the administration is allowed to launch reorganizations as litigation continues. However, they maintained that the ruling does not speak to the legality of any agency plans for restructuring or shrinking the workforce.  

Affected agencies include, but are not limited to, the Departments of Agriculture, Energy, Health and Human Services, and Veterans Affairs, as well as the IRS, Small Business Administration, and Environmental Protection Agency.   

The district court will now determine the legality of the layoffs. 

The decision follows the United States District Court of the Northern District of California’s verdict, temporarily preventing the reductions in force from occurring. US District Judge Illston maintained agencies would not be able to perform the tasks mandated by Congress if the reductions in force continued. 

The decision also arrived shortly after a US District Court for the District of Rhode Island stopped mass firings and restructuring at the US Department of Health and Human Services from proceeding. Judge DuBose determined the proposed cuts violate the Administrative Procedure Act as they are arbitrary, capricious, and unsupported by the evidence. The court also upheld the irreparable harm the plaintiffs are expected to experience as they will not be able to continue offering federally funded health programs. The order paused 40 reduction in force actions underway at 17 agencies. 

Federal Court Upholds Birthright Citizenship  

The U.S. District Court for the District of New Hampshire blocked the enforcement of an executive order prohibiting birthright citizenship. Judge LaPlante issued a preliminary injunction nationwide and certified a class action lawsuit, including all children who will be affected. 

The executive order limits birthright citizenship to individuals with at least one parent who is a U.S. citizen or permanent resident. The order also denies citizenship to children whose mothers are temporarily in the U.S., including those visiting under the Visa Waiver Program or as tourists. Students and individuals whose fathers are not citizens or lawful permanent residents would be excluded as well.

HHS Ordered to Restore Data Removed Due to “Gender Ideology” Executive Order 

The U.S. District Court for the District of Columbia ordered the Department of Health and Human Services to restore webpages and datasets that were removed in response to the executive order, Defending Women from Gender Ideology Extremism and Restoring Biological Truth to the Federal Government. 

Doctors for America filed the lawsuit, maintaining that providers relied on the data and websites to perform routine patient care tasks. They highlighted the expanse of data removed, including information about prescribing HIV medication and contraception and caring for patients with opioid dependency. 

Doctors for America alleged that, in removing essential documents, the government had failed to provide adequate reason or notice. Judge Bates affirmed the decision to remove documents failed to consider the impact on physicians and neglected to follow the procedures that Congress has prescribed, ordering the data be restored. 

Federal Court Upholds DOGE’s Access to Labor and Health and Human Services Data 

The U.S. District Court for the District of Columbia permitted the Department of Government Efficiency (DOGE) to retain access to computer systems and data at the Labor and Health and Human Services Departments. 

Unions and nonprofits previously issued a lawsuit due to DOGE’s lack of legal authority in accessing the data and their violation of the Administrative Procedure Act. However, Judge Bates determined that the plaintiffs failed to show the required harm for a preliminary injunction. The court cited a lack of evidence that personnel will imminently misuse or publicly disclose sensitive information. 

Litigation on Our Radar 

IRS Seeks Non-Enforcement of the Johnson Amendment 

The IRS recently responded to a lawsuit filed by two Texas churches and an association of Christian broadcasters that sought a broad exemption to the Johnson Amendment. The plaintiffs requested that they would be able to endorse candidates to their members while maintaining their tax exempt status, maintaining that nonprofit nonpartisanship violates the First Amendment right to free speech.

If successful, the request would overrule a longstanding protection for nonprofits. The Johnson Amendment states that charitable nonprofits, foundations, and religious organizations that maintain a 501(c)(3) status may “not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.” 

In response to the lawsuit, the IRS wrote that if a house of worship endorsed a candidate to its congregants, the IRS would view that not as campaigning but as a private matter. The IRS and the plaintiffs asked the federal judge to stop the Johnson Amendment from being enforced against the parties filing the lawsuit.

The IRS’ statement signals a dangerous precedent. If the Johnson Amendment is not fully enforced, its legal and cultural authority could erode—along with the nonpartisan foundation of our sector. While the case centers on religious organizations, the implications may extend far beyond houses of worship. Weakening the Amendment could open the door to widespread politicization of nonprofit work. 

Social Current remains resolute in advocating for the full enforcement of the Johnson Amendment. For further information, we have recently issued a statement, stressing the amendment’s importance for the nonprofit sector and warning of the harm a weakened version would have.

16 States File a Lawsuit to Restore Mental Health Grants 

A coalition of 16 states filed a lawsuit against the Department of Education after approximately $1 billion in federal mental health funding was abruptly discontinued. 

The withdrawal of funds is expected to cause the dismissal of school-based mental health employees, defund scholarships for college students preparing to serve as mental health professionals in K-12 schools, and eliminate critical mental health services offered by schools. 

The state attorneys general argue that discontinuing the multi-year grants violates federal law and regulations. They are requesting that the funding be restored immediately. 

Cities Challenge CMS Rule Expected to Significantly Reduce Coverage  

The cities of Baltimore, Chicago and Columbus, Ohio, along with a coalition of health care professionals and small businesses, filed a lawsuit against the recently issued Patient Protection and Affordable Care Act; Marketplace Integrity and Affordability Final Rule. 

The rule is intended to address waste, fraud, and abuse in the Patient Protection and Affordable Care Act (ACA) eligibility and enrollment systems alongside rising “improper enrollment and health care costs,” according to CMS. HHS maintains the rule closes loopholes, strengthens oversight, and ensures taxpayer subsidies go to individuals who are truly eligible. 

The lawsuit stresses the barriers the rule would create in accessing affordable insurance coverage, leading to an increased population of underinsured and uninsured Americans. The plaintiffs cite the harm expected to follow maximum annual cost-sharing limitations and stricter income-verification measures required by the rule. They also highlighted the hardships expected to follow the required premium increases for exchange plans, which would reach up to $714 per year for an average family, as well as the shortened enrollment period, which would be reduced by two weeks.

The plaintiffs warn that the rule will cause at least 1.8M Americans to lose ACA coverage and result in higher premiums and out-of-pocket costs. 

The plaintiffs are requesting that the rule be blocked before it takes effect on August 25 due to its violation of the Administrative Procedure Act. 

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