Capping indirect costs would’ve led to cuts or reduced research, college leaders warned.
The National Institutes of Health and other federal agencies can’t make any changes to how universities are reimbursed for costs indirectly related to research until at least Sept. 30, under the recently passed budget bills that President Trump signed into law.
The legislation ends a yearlong effort from the Trump administration to cap reimbursements for indirect research costs at 15 percent. The average reimbursement rate for institutions is 27 to 28 percent, though some colleges have negotiated reimbursement rates greater than 50 percent.
When the NIH announced Feb. 7, 2025, that it would cap the rates, colleges and universities warned they would have to cut costs or research operations to make up the difference. The funding for indirect costs helps to pay for hazardous waste disposal, utilities and patient safety. The rate cap would’ve saved about $4 billion, the NIH said.
But lawsuits quickly led to court orders that blocked the NIH from capping the rates. And then the National Science Foundation as well as the Energy and Defense Departments also sought to put a 15 percent cap in place—policies that federal judges also blocked. The Trump administration has appealed the decisions, so litigation continues.
Now, Congress has weighed in as well, blocking any changes to the reimbursement rates for fiscal year 2026, which ends Sept. 30. That legislation led the Energy Department to formally announce that its policy changes related to indirect research costs were no longer in effect. Likewise, a Pentagon official told Inside Higher Ed that “the department is not presently working toward changes to indirect cost rates.” The NIH and NSF didn’t respond to a request for comment.
Cost Cuts Still Loom
But the conversation about funding indirect research costs likely isn’t over. The legislation also directed the agencies to work with universities on ways to improve the funding model for research. Lawmakers say there’s room for improvement in the current system, “particularly with respect to the need for greater transparency into these costs.”
The legislation specifically mentions the proposal from 10 higher education associations that would overhaul how the government funds research. That proposal, the Financial Accountability in Research (FAIR) model, would break up research costs into three buckets: research performance costs (the current direct costs), essential research performance support (current indirect costs) and general research operations (institutionwide services that are necessary for research that are currently lumped into the indirect cost category).
The 10 associations, collectively known as the Joint Associations Group, came together to rethink the research funding model because they realized that something was going to change with or without the input of universities. The FAIR model is aimed at increasing accountability and clarity in how federal research funding is spent, according to JAG.
Nearly 300 national organizations, including scientific societies, patient advocacy groups and funding foundations, wrote to Congress last fall in support of JAG’s plan and asked for a two-year transition period to any new funding model.
“We believe that the recommendations put forward by the JAG would enhance transparency and accountability associated with federally funded research without undermining overall support critical to American science,” the letter stated. “While granular details of the model will need to continue to be refined through its implementation process, we believe the core of the model addresses the themes that lawmakers and policymakers have prioritized while also ensuring American leadership in science and innovation continues.”
As for JAG, it applauded Congress for supporting indirect research costs.
“We thank Congress—and particularly the leadership and appropriators in each chamber—for ensuring continued support for all the costs associated with advancing American science, and for continuing to engage with the JAG on the FAIR model.”
