The recent overhaul of US foreign assistance by President Donald Trump has caused widespread turmoil in the aid and development sector, leaving numerous USAID contractors grappling with financial instability. Many have been forced to lay off staff as they deal with millions of dollars in unpaid invoices.
Drastic Changes in USAID Operations
Within hours of assuming office on January 20, Trump ordered a comprehensive review of US foreign aid. He appointed billionaire Elon Musk to oversee the reduction of USAID operations, despite Musk’s previous allegations that the agency functioned as a “criminal” organization. Consequently, dozens of USAID staff were put on leave, hundreds of contractors were laid off, and a newly created Department of Government Efficiency dismantled key functions of the agency.
The State Department’s blanket stop-work orders have left aid organizations in disarray. These contractors typically front the costs of their projects before billing the government, making the sudden freeze in payments a significant blow to their financial stability.
Financial Crisis Hits Contractors Hard
Steve Schmida, co-founder of Vermont-based Resonance, a long-time USAID contractor, described the situation as “existential.” With millions in approved invoices left unpaid, his company has had to furlough and lay off dozens of staff, reducing its workforce from nearly 100 US-based employees to just a handful.
“The last 10 days have been the worst 10 days of my professional life,” Schmida stated, highlighting the dramatic impact of the policy shift.
Another USAID contractor, speaking anonymously for fear of retribution, revealed that their company had to furlough hundreds of US-based employees due to over $50 million in unpaid invoices from November and December.
Both Schmida and the anonymous contractor are considering legal action against the US government to recover outstanding balances.
Trust in US Foreign Aid Severely Damaged
Beyond the financial ramifications, the sudden layoffs have eroded trust in US foreign aid commitments. Many USAID employees were dismissed just days before their benefits and health insurance expired.
Rose Zulliger, a senior malaria technical adviser with the President’s Malaria Initiative, was abruptly terminated last week. She was left scrambling to secure insurance before her daughter’s upcoming tonsillectomy.
“It’s not just the personal stress of losing a job,” Zulliger explained. “Global health initiatives that save lives and protect Americans have been put on pause. The relationships we’ve worked so hard to build have been ruptured.”
Impact on Global Humanitarian Efforts
In 2023, the US disbursed $72 billion in aid worldwide, funding crucial programs such as women’s health in conflict zones, clean water access, HIV/AIDS treatments, energy security, and anti-corruption measures. This aid represented 42% of all humanitarian assistance tracked by the United Nations in 2024.
Foreign aid, though comprising less than 1% of the US budget, has been instrumental in strengthening diplomatic ties and countering geopolitical influences from China and Russia. The abrupt funding cuts threaten these long-standing efforts.
Families of USAID Contractors Face Economic Hardship
The sweeping changes have also devastated the personal lives of many affected employees. Esther Zeledon and her husband, Paul Rivera, lost 95% of their income due to the executive orders targeting foreign aid and diversity initiatives.
“We had our entire year’s finances planned,” Zeledon lamented. “Now, there’s so much uncertainty.” The couple is considering moving in with Zeledon’s parents and may need to withdraw funds from their 401(k) retirement plan to meet expenses.
Similarly, Amanda Satterwhite, an independent contractor for USAID, has seen her job put on hold without pay. Tasked with identifying local aid recipients abroad, her role was suddenly halted last week. Uncertain about the future of the aid industry, she has already begun searching for new employment.
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Protests and Uncertain Future for USAID
On Monday, dozens of USAID staff, contractors, and Democratic lawmakers protested outside the agency’s Washington headquarters, which was shut down for the day. Their demands for clarity and financial relief remain unanswered as the Trump administration moves forward with its aid restructuring.
As the uncertainty continues, aid organizations and contractors are left wondering if the industry will ever recover from the disruption.
