The National Institutes of Health announced major reductions to indirect costs for research funding Feb. 7 in a move many experts say would cause serious harm to lifesaving medical research, universities, hospitals and patients.
The policy applied a blanket 15% cap on indirect costs — generally called facilities and administrative costs — for new and existing grants. Those costs were previously individually negotiated; the NIH said the average rate was around 28%, with some over 60%.
Calling the cuts an “extraordinary attempt to disrupt all existing and future grants,” 22 states sued the Trump administration Feb. 10 — the day they were set to take effect — with lawsuits following from the Association of American Medical Colleges and other groups. Judge Angel Kelley of the U.S. District Court in Massachusetts initially ordered a temporary halt in the plaintiff states, then a nationwide pause. Kelley issued a permanent injunction April 4, ruling that NIH’s notice violated federal statute; was “arbitrary and capricious; failed to follow notice-and-comment procedures; and was impermissibly retroactive.”
This “decision ensures that research institutions, including schools and programs of public health, can continue to receive appropriate reimbursement for the infrastructure and administrative costs essential to conducting federally funded research,” according to a statement from the Association of Schools and Programs of Public Health.
However, the policy remains in a legal battle as President Donald Trump’s administration filed an appeal in April. The Supreme Court recently ruled to restrict nationwide injunctions by federal district courts against federal policies as part of a landmark case about birthright citizenship. In the court’s opinion, Justice Amy Coney Barrett wrote for the 6-3 majority: “These injunctions — known as ‘universal injunctions’ — likely exceed the equitable authority that Congress has granted to federal courts.”
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Other federal agencies, such as the U.S. National Science Foundation, have also instituted lower caps on indirect costs. NSF, which supports science and engineering in all U.S. states and territories, issued a policy notice May 2 stating that a 15% cap would put more focus on “scientific progress and less on administrative overhead by aligning with common federal benchmarks.”
However, ruling on the lawsuit against the NSF, Judge Indira Talwani of the U.S. District Court in Massachusetts vacated the policy June 20 and ordered NSF to notify all grant recipients of the decision within 72 hours.
Here’s what to know about indirect research costs and what reductions could mean.
What Are Indirect Research Costs?
Indirect costs generally include equipment and office space, technology, research security, data processing, biosafety, financial and accounting support, and legal and compliance support. Lab construction and outfitting, research equipment, utilities, hazardous waste removal and pay for graduate students working in labs may also be included.
Schools negotiate rates with the NIH, which can vary based on their research status. Each research project may have different indirect costs, experts say.
For fiscal year 2023, NIH spent more than $35 billion in about 50,000 grants to more than 300,000 researchers at more than 2,500 medical schools, universities and other research institutions, the agency said, with about $9 billion of that going to indirect costs.
Opponents of the lower indirect funding caps say covering indirect expenses is essential to continue research into cancer, Parkinson’s disease, diabetes and bird flu, among other diseases, as well as state-specific health issues.
“The vitality of our nation’s research universities directly affects us all,” Penny Gordon-Larsen, vice chancellor for research at the University of North Carolina at Chapel Hill, wrote in a blog post. “Groundbreaking discoveries in medicine, technology, national security, agriculture and countless other areas originate from their labs. These institutions are not just academic centers; they are economic powerhouses, fueling job creation and driving innovation. They also cultivate the next generation of scientific minds and leaders.”
Why Lower Indirect Cost Caps?
In its initial guidance, the NIH said the 15% cap aligns with market rates, noting that grants from many private foundations offer universities much lower indirect cost rates compared to the federal government. The NIH cited rates from private foundations from 0% to 15%.
But these private organizations are able to offer lower reimbursement for indirect costs because of the level of federal assistance institutions receive through NIH, says Marion Pepper, professor and chair in the University of Washington School of Medicine‘s Department of Immunology.
“Universities are doing a real service to the American people and to the taxpayers by hosting science,” Pepper says. “There isn’t really anywhere else for this to happen. … The agreement that has been set up with the NIH (is) we will host the science, but we also need help with this. And that could never be covered by a private foundation in the same way.”
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Many institutions rely heavily on NIH grants. About 66% of research funding at UNC came from federal sponsorships in fiscal year 2024, for instance, with nearly 75% of that from the NIH, per the school’s website.
Conversations about spending money responsibly are important, says Chenjerai Kumanyika, a member of the American Association of University Professors governing council. However, “trying to make, for example, our institutions and funding structures work in a more efficient and accountable way, you don’t do that by just going to war against all this funding and hurting communities,” he says.
Where Would the Money Go?
In a statement emailed to U.S. News Feb. 11 in response to questions about the cap reductions, NIH said it “increased funding available for cutting edge science and research by over $4B a year by taking dramatic action to reduce funding for administrative overhead.” The agency didn’t answer direct questions about its plans for that money, but said the administration “wants to help America have the best research in the world, and we believe that by ensuring that more cents on every dollar go directly to science and not to administrative overhead, we can take another step in that direction.”
During a Feb. 21 court hearing, a U.S. Justice Department lawyer said the money wouldn’t be saved but instead redirected to fund new research grants.
One question is whether the cap could mean more grants for states that typically get a smaller share, says Jagdish Khubchandani, a professor of public health at New Mexico State University. Currently, he says, almost half of NIH research funding goes to institutions in four states: California, New York, Massachusetts and North Carolina.
Khubchandani says he’s open to reform if there’s logic behind it, but the cuts feel arbitrary and raise more questions than answers.
What Could the Lower Cap Mean for Research Institutions?
The states’ lawsuit said institutions had already set budgets and made obligations based on specific indirect cost rates negotiated with the federal government, and the cap would “result in layoffs, suspension of clinical trials, disruption of ongoing research programs and laboratory closures.”
According to a June 11 statement from AAMC, “without these additional funds, some research would not continue. Clinical trial patients would lose access to what, for some, might be their last hope for treatment. The loss of basic science research would slow scientific progress.”
For someone who has written an NIH grant application, “it takes days and months and you don’t just change the budget overnight to reduce it from 50% to 15%,” Khubchandani says. “So I think the conceptualization has some major issues.”
For higher education institutions, the NIH said in February, “we have the authority to make these changes” retroactive for current grants and “require grantees to return the excess overhead they have previously received. But we have currently chosen not to do so to ease the implementation of the new rate; however, we will continue to assess this policy choice and whether it is in the best interest of the American taxpayer.”
The cuts would threaten the status of U.S. institutions as global leaders in research, Khubchandani says. U.S. institutions have produced major medical advances like vaccines and DNA sequencing, and most were backed by NIH money, he says.
Tuition could increase as a result of the cuts, some experts say, unless schools choose another solution. In some cases, schools may be able to dip into endowment funds, Khubchandani says.
“A sad reality of medical science today and public health is that people do research based on the budget they have,” he says. “That should not be the case.”
Several national organizations representing research institutions, alongside other experts, have formed the Joint Associations Group to develop a “more efficient and transparent model for funding indirect costs on federal research grants.”
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The effort “seeks to identify and reduce regulatory barriers, produce a simple and easily explained model, and increase transparency, all in service of a singular goal: to ensure that taxpayer dollars continue to be used effectively to advance research that benefits all Americans,” according to a statement from the Association of Public & Land Grant Universities.
How Could Students Interested in Research Be Affected?
The states’ lawsuit argued that the cuts would hurt universities’ ability to provide students with research experience.
Khubchandani says current medical and premedical students should keep working toward their goals, but the cuts are causing “chaos and confusion” that’s “demotivating for American scientists” considering the medical profession.
Changes are happening quickly, “so we need to see where this lands,” Pepper says. But if the cuts ultimately occur, she predicts fewer positions in graduate programs, which has already happened at some schools.
The University of Pittsburgh in Pennsylvania temporarily paused Ph.D. admissions and the University of Pennsylvania announced plans to cut grad school admission rates, while others have frozen hiring. Dr. Michael V. Drake, president of the University of California, for instance, announced a systemwide hiring freeze March 19 to “help the university manage costs and conserve funds.”
“I recognize this is a time of great uncertainty for many in our UC community and in higher education across the country,” Drake wrote in the statement. “Throughout our history as an institution and as a nation, we have weathered struggles and found new ways to show up for the people we serve. We will address these challenges together. I have tremendous confidence in the team that is working on these issues and in the dedication of our students, faculty and staff.”
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NIH Cuts to University Research Funding: What to Know originally appeared on usnews.com
Update 07/09/25: This story was published at an earlier date and has been updated with new information.
