A federal judge Friday extended a temporary block on the National Institutes of Health’s plan to slash funding for universities’ indirect research costs amid a legal battle over the policy change.
The nationwide block, which U.S. District Judge Angel Kelley put in place Feb. 10 soon after a coalition of state attorneys general, research advocates and individual universities sued the agency, was set to expire Monday. But it will now remain in place until Kelley has time to consider the arguments the plaintiffs and NIH presented at a hearing Friday morning.
It’s unclear when Kelley will rule. But after the two-hour hearing, she said she certainly “has a lot of work to do” to before making a decision.
“This case is not about whether as a policy matter the administration can target waste, fraud and abuse,” Katherine Dirks, an attorney for the Massachusetts attorney general’s office, told the judge during the hearing. “It’s contrary to the regulations which govern how these costs are determined and how these payments are disbursed. If there were an intention on the administration’s part to change the mechanism by which those occur, there’s a process for it—a statutory process and a regulatory process. Neither of those were followed here.”
But the NIH’s legal team said the agency has the right to unilaterally cap reimbursements for costs related to research—such as hazardous waste removal, facilities costs and patient safety—at 15 percent.
“This is not cutting down on grant funding,” said Brian Lea, a lawyer for the NIH, said at Friday’s hearing. “This is about changing the slices of the pie, which falls squarely within the executive’s discretion.”
Counsel for the plaintiffs, however, argued that the policy is unlawful and, if it’s allowed to move forward during a protracted litigation process, will cause “irreparable harm” to university budgets, medical breakthroughs and the patients who may not be able to enroll in clinical trials as a result.
“A clinical trial is for a lot of people a last hope when there’s not an FDA–approved medicine that will treat their condition. Any minute that they’re not enrolled in that trial brings the risk of irreparable harm,” said Adam Unikowsky, an attorney for the plaintiffs. “Part of these institutions’ mission is serving these patients, and this cut will irreparably harm their ability to fulfill that mission.”
Since 1965, institutions have been able to periodically negotiate their reimbursement rates directly with the federal government; university rates average about 28 percent. However, rates can vary widely depending on factors such as geographic cost differences and the type of research, and some institutions receive indirect reimbursement rates of more than 50 percent of their direct grants.
Although the NIH argued in court that indirect costs are “difficult to oversee” as a justification for cutting them, the plaintiffs refuted that claim, pointing to a complex negotiation process and regular audit schedule that’s long been in place to ensure the funds are being used to support NIH research.
In fiscal year 2024, the NIH sent about $26 billion to more than 500 grant recipients connected to colleges—$7 billion of which went to indirect costs.
This isn’t Trump’s first attempt to cap indirect costs, which Elon Musk—the unelected billionaire bureaucrat overseeing the newly created Department of Government Efficiency—recently characterized as a “rip-off” on X, the social media site he owns.
In 2017, Congress rebuked President Trump’s attempt to cap indirect costs, and it has written language into every appropriations bill since specifically prohibiting “deviations” from negotiated rates. Given that, Kelley asked the Trump Administration’s legal team, how in his second term, Trump “can unilaterally slash these previously negotiated indirect cost rates which Congress prevented him from doing previously?”
“The money that is saved—it’s not being saved, it’s being reallocated—will be taken from indirect costs and filed into new grants that will be using the same funding formula,” said Lea, who told the judge he was using air quotes around the word saved. “The money is not being pocketed or being shipped somewhere else. It’s being applied back into other research in a way that best fits NIH and what will best serve the public’s health.”
But Lea’s claims that the money will simply be reallocated contradicted the NIH’s own social media post from Feb. 7, which said the plan “will save more than $4B a year effective immediately,” and Kelley asked for an explanation.
In response, Lea said the NIH’s “tweet was at best sort of a misunderstanding of what the guidance does.”
The Department of Health and Human Services, which oversees the NIH, did not immediately respond to Inside Higher Ed’s request for comment on whether it plans to issue a widespread public correction on social media and its other platforms to clarify its policy and inform taxpayers that their plan to cap indirect costs is not intended to save them any money. As of Friday afternoon, the post was still up on X.
But Unikowsky, an attorney for the plaintiffs, said that funneling money away from indirect costs would still harm the nation’s esteemed scientific enterprise, which is grounded in university research.
“Indirect costs are real costs associated with doing research,” said Unikowsky, pointing to the California Institute of Technology as an example. The institute spent $200 million to build a state-of-the-art laboratory and is counting on indirect cost reimbursements from the NIH to help pay off the debt it incurred to construct it.
“There’s going to be a hole in Cal Tech’s research budget” and the “money is going to have to come from somewhere else,” Unikowsky added.
Unikowsky also listed nine different institutions, including the Universities of Florida, Kansas and Oregon, that have said they will have to lay off skilled workers who support medical research, including nurses and technicians, if the cap goes into effect.
Lea, the lawyer for the Trump Administration, countered that destabilizing university budgets doesn’t amount to immediate and permanent harm warranting injunctive relief on the rate caps.
“That’s not an irreparable thing, or else every business that’s in a money pinch could just come in and get an injunction,” he said. “I understand that many institutions would prefer to use endowments and tuition for other purposes, but unless they’re barred from doing so—and the inability to do so would cause some non-monetary harm—that’s not irreparable harm.”
Although Kelley gave no indication on when or how she plans to rule, some university leaders who listened to the hearing came away optimistic that she’ll favor the plaintiff’s arguments.
“We look forward to the judge’s ruling,” said Katherine Newman, provost at the University of California which is one of the universities suing the NIH. “[We] maintain our position that the Administration’s misguided attempt to cut vital NIH funding is not only arbitrary and capricious but will stifle lifesaving biomedical research, hobble U.S. economic competitiveness and ultimately jeopardize the health of Americans who depend on cutting-edge medical science and innovation.”
The Senate Health, Education, Labor, and Pensions Committee has advanced Linda McMahon’s nomination for Secretary of the US Department of Education (ED). The HELP panel voted 12-11 to approve McMahon, former CEO of World Wrestling Entertainment and co-founder of the America First Policy Institute. According to the Hill, McMahon is almost certain to be confirmed by the Senate. President Trump has directed McMahon to dismantle ED, which includes funding for poor school districts and children with disabilities, in addition to holding a student loan portfolio estimated to be worth $1.6 Trillion. A number of civil rights organizations, including the NAACP, oppose the nomination. DOGE already fired dozens of workers from the small agency.
Last week, the Department of Education’s Office for Civil Rights published a “Dear Colleague Letter” describing educational institutions’ obligations under federal anti-discrimination law and explaining how OCR will interpret Title VI and other legal authorities.
Since FIRE is, at its core, an organization dedicated to free expression, we reviewed OCR’s letter through that lens. In this blog entry, we offer recommendations to OCR to ensure that it does not unlawfully censor educational institutions or pressure them to censor their students and faculty, and we ask for additional clarification of the letter. We also offer recommendations to colleges and universities to prevent overreactions to the DCL and to ensure they continue to protect student and faculty free speech rights.
Title VI prohibits educational institutions receiving federal funding from discriminating against individuals on the basis of race, color, or national origin. In Students for Fair Admissions v. Harvard and Students for Fair Admissions v. UNC, the Supreme Court of the United States struck down racial preferences in college admissions for violating the Equal Protection Clause of the Fourteenth Amendment and Title VI of Civil Rights Act of 1964. In interpreting Title VI, the Equal Protection Clause, and the SSFA decision, OCR’s letter states:
Although SFFA addressed admissions decisions, the Supreme Court’s holding applies more broadly. At its core, the test is simple: If an educational institution treats a person of one race differently than it treats another person because of that person’s race, the educational institution violates the law [ . . .] Put simply, educational institutions may neither separate or segregate students based on race, nor distribute benefits or burdens based on race.
The letter also advises institutions to:
- Ensure that their policies and actions comply with existing civil rights law;
- Cease all efforts to circumvent prohibitions on the use of race by relying on proxies or other indirect means to accomplish such ends; and
- Cease all reliance on third-party contractors, clearinghouses, or aggregators that are being used by the institutions in an effort to circumvent prohibited uses of race.
The letter warns that “[i]nstitutions that fail to comply with federal civil rights law may, consistent with applicable law, face potential loss of federal funding.”
Irrespective of whether one agrees or disagrees with race-conscious policies, OCR is likely within its authority to prohibit institutions from providing or denying benefits to individuals based on their race. But while FIRE has no institutional position on affirmative action programs, we routinely see government actors use anti-discrimination rationales to censor First Amendment-protected speech.
FIRE has seen a number of states seek to rein in DEI-related administrative offices at their state educational institutions. We’ve told those legislatures repeatedly that, while they have significant authority to manage nonacademic bureaucracies at their public higher education institutions, they cannot restrict which ideas can be taught in the college classroom, including on topics related to “diversity, equity, and inclusion,” or related concepts. They also cannot restrict student organizations from forming around or advocating on behalf of DEI initiatives.
OCR’s new Dear Colleague letter chides educational institutions for “routinely us[ing] race as a factor in admissions, financial aid, hiring, training, and other institutional programming.” [Emphasis added.] It states that over the past few years, schools have “toxically indoctrinated” students, asserting that institutions have been “smuggling racial stereotypes and explicit race-consciousness into everyday training, programming, and discipline.” [Emphasis added.]
West Virginia Gov. Patrick Morrisey issued an executive order to eliminate DEI practices in state agencies and organizations that receive state money.
While OCR is free to criticize colleges for overstepping the bounds of the law on DEI-related issues over the past few years, it must be careful when turning that criticism into policy. When a regulatory agency with the authority to cut off all federal funding to institutions cites certain types of “programming” as evidence that institutions could be violating federal anti-discrimination law, it risks chilling speech on those topics. That is especially true when the term “programming” is left undefined in the letter. Private institutions also maintain broad First Amendment rights of their own, and threats to punish them for their own speech about DEI or affirmative action risks violating the free speech rights of those institutions.
To abate any confusion arising from the letter, OCR should provide additional guidance to describe in more detail the types of programming it thinks violates Title VI and other anti-discrimination laws. Does OCR seek to prohibit institutions from hosting outside speakers who espouse disfavored ideas about DEI? Does OCR seek to limit particular classwork or research at institutions? If so, it has strayed beyond the First Amendment’s boundary.
To avoid chilling protected speech, OCR should clarify the distinction between providing benefits or preferences to individuals based on race or other protected characteristics, and pure speech about DEI and affirmative action — and make clear that it is not banning the latter. OCR must also be careful about regulating institutional trainings at private institutions in ways that violate institutional free speech rights.
As FIRE has made clear many times over the course of several administrations, OCR is bound by the First Amendment and cannot order or compel colleges and universities to violate it.
Courts have struck down government attempts to regulate DEI-related trainings offered by private businesses. The U.S. Court of Appeals for the Eleventh Circuit, for example, upheld an injunction blocking Florida’s Stop WOKE Act insofar as it applied to private business trainings, writing that “by limiting its restrictions to a list of ideas designated as offensive, the Act targets speech based on its content. And by barring only speech that endorses any of those ideas, it penalizes certain viewpoints—the greatest First Amendment sin.”
FIRE hopes OCR will quickly provide institutions with additional clarity about the full scope of its Title VI interpretations.
FIRE is challenging other parts of the Stop WOKE Act that restrict classroom instruction in higher education on First Amendment grounds. After a federal district court issued a preliminary injunction preventing the state from enforcing those sections of the law, our case is now before the Eleventh Circuit.
To the extent OCR is concerned about the lawfulness of certain mandatory training programs, OCR could require state institutions to make public their training materials on DEI-related issues. FIRE’s Intellectual Freedom Protection Act, which prohibits public colleges from requiring mandatory DEI statements — or any other political litmus test — as a condition of hiring or promotion, contains a provision that could be a useful starting point:
Each public institution of higher education in the state shall post and make publicly available all training materials used for students, faculty, and staff, on all matters of nondiscrimination, diversity, equity, inclusion, race, ethnicity, sex, or bias, and all of its policies and guidance on those issues, on its website.
Such a requirement would provide both regulators and the public with a better idea of how institutions train its students about DEI-related topics.
If there is a conflict — real or perceived — between federal guidance and the First Amendment, the First Amendment prevails. For public institutions, this means they cannot violate faculty or student speech or associational rights regardless of federal agency guidance. For private institutions, this means federal guidance cannot unlawfully restrict the institution’s speech or pressure the institution to unlawfully suppress the speech or association of their faculty or students.
Campus administrators nationwide should not over-read this Dear Colleague Letter to justify censoring student or faculty expression. It would be wise to read it in conjunction with President Trump’s Jan. 21 Executive Order “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” the directive that likely led to this letter and that contains provisions expressly protecting free speech and academic freedom:
(b) This order does not prevent State or local governments, Federal contractors, or Federally-funded State and local educational agencies or institutions of higher education from engaging in First Amendment-protected speech.
(c) This order does not prohibit persons teaching at a Federally funded institution of higher education as part of a larger course of academic instruction from advocating for, endorsing, or promoting the unlawful employment or contracting practices prohibited by this order.
Since the Justice Department has a role in enforcing Title VI alongside that of the Education Department’s OCR, institutions should also note Attorney General Bondi’s memo on “Ending Illegal DEI and DEIA Discrimination and Preferences.” Her memo expressly notes:
This memorandum is intended to encompass programs, initiatives, or policies that discriminate, exclude, or divide individuals based on race or sex. It does not prohibit educational, cultural, or historical observances—such as Black History Month, International Holocaust Remembrance Day, or similar events—that celebrate diversity, recognize historical contributions, and promote awareness without engaging in exclusion or discrimination.
When read together in the context of these companion documents, the new DCL should provide no justification for institutions to believe they must censor students, student organizations, or faculty, or rush to cancel university-sponsored cultural events or celebrations. Moreover, doing so may well violate the First Amendment at public universities—and again, courts will always give precedence to constitutional guarantees over guidance and regulations. Colleges will, however, need to end any policy or programs that actively separate individuals or provide benefits based on race.
Given the tight timeline for compliance, FIRE hopes OCR will quickly provide institutions with additional clarity about the full scope of its Title VI interpretations. In the meantime, we again remind colleges and universities to honor their constitutional duties or institutional promises to protect the freedom of expression and academic freedom of their students and faculty.
A federal judge extended an emergency restraining order Friday against the National Institutes of Health, temporarily preventing the agency from making massive cuts to indirect research funding.
The restraining order bars NIH from implementing a 15% cap on indirect cost reimbursement and requires the agency to file regular status reports confirming disbursement of funds. U.S. District Judge Angel Kelley, a Biden appointee, is considering a more permanent injunction against NIH’s plan after nearly two hours of oral arguments Friday.
NIH unveiled the new policy earlier in February. Historically, institutions negotiate their own indirect cost reimbursement rates with the agency, with an average of 27% to 28%. The change was met swiftly with multiple lawsuits, including by higher education groups and 22 state attorneys general. The cases were considered together at the hearing Friday.
Several universities have already frozen hiring and taken other budgetary measures amid the NIH funding uncertainty, despite Kelley’s initial pause on the funding cap.
The funding for indirect costs — also known as facilities and administrative, or F&A, costs — covers a wide array of staffing and infrastructure for research activity.
“Indirect costs are the backbone of IHEs [institutions of higher education] research programs and cover everything from utilities to facilities and equipment maintenance to payroll for faculty and staff to compliance programs, hazardous waste disposal, and more,” 22 state attorneys general said in their original request for a temporary restraining order on NIH. “They quite literally keep the lights on.”
Brian Lea, an attorney for NIH, said at Friday’s hearing that money saved by cutting and capping F&A funding would be “ploughed into” funding for research costs. However, in a Feb. 7 post from the agency on the social media site X, NIH said the funding cap “will save more than $4B a year effective immediately.”
Asked by Kelley about the post, Lea said that it was “at best a misunderstanding” of NIH’s guidance.
Plaintiffs attorneys argued that the F&A cap violates federal laws and regulations, pointing out that Congress passed an appropriations bill during President Donald Trump’s first term that prohibits modifications to NIH’s indirect cost funding.
Lea maintained that NIH’s guidance was compliant with regulations and statutes and within the “broad discretionary power of the executive branch” to allocate funding.
Attorneys for the plaintiffs further argued that an injunction was necessary to prevent “immediate and irreparable” harm, pointing to numerous universities that have detailed how their research, budgets and infrastructure would suffer from the cap. An official at Yale University, for example, said in court papers that the NIH rate cap could threaten the viability of many of its ongoing clinical trials for medical research.
“It is not hyperbole to say that, absent immediate injunctive relief, Plaintiff States’ IHEs will face catastrophic financial consequences, which could result in layoffs and furloughs, research program closures, financial defaults, and disruptions to clinical trials, potentially jeopardizing people’s lives and health,” the attorneys general said in their motion, filed earlier in February.
Lea questioned whether harms such as funding losses were irreparable, suggesting that they could be undone later through private funding or operational adjustments.
As the case winds on, NIH has laid off more than 1,000 employees, according to press reports.
The Education Department originally asked colleges to submit the gainful employment and financial value transparency data by July 2024, but higher education institutions requested more time given last year’s bumpy rollout of the revamped Free Application for Federal Student Aid.
The Biden administration released final gainful employment and financial value transparency regulations in 2023.
Under the gainful employment rules, career education programs must prove that their graduates earn enough money to pay off their student loans and that at least half of them make more than workers in their state who only have high school diplomas. Programs that fail those tests risk losing their access to Title IV federal financial aid.
Although the financial value transparency regulations don’t threaten federal financial aid, they create new reporting requirements for all colleges. Under the rule, the Education Department will post data collected from institutions about their programs — such as costs and debt burdens — on a consumer-facing website to help students make informed decisions about their college attendance.
The Biden administration extended the deadline for reporting requirements three times. Despite the delays, Education Department officials said late last year that they still expected to produce data in the spring to help students select their colleges.
With its latest announcement, the Trump administration’s Education Department is delaying that timeline also.
“The Department does not plan to produce any FVT/GE metrics prior to the new deadline and will take no enforcement or other punitive actions against institutions who have been unable to complete reporting to date,” it said.
It’s so far unclear how the Trump administration will handle the gainful employment regulations. In President Donald Trump’s first term, then-Education Secretary Betsy DeVos rescinded the Obama-era version of the rules, saying they unfairly targeted the for-profit college sector.
The Education Department is facing at least one lawsuit over the Biden administration’s version of the gainful employment rule. However, a federal judge earlier this month paused legal proceedings for 90 days after the new administration sought more time “to become familiar with and evaluate their position regarding the issues in the case,” according to court documents.
The National Association of Student Financial Aid Administrators — one of the organizations that pushed for a delay — applauded the move to extend the regulatory reporting deadline.
The change “is a sensible and welcome decision that will give financial aid offices much needed breathing room while they navigate unresolved issues in submitting their data and make necessary corrections to ensure the data they submit is accurate,” NASFAA Interim President and CEO Beth Maglione said in a statement last week.
The U.S. Supreme Court on Friday unanimously ruled that reimbursement requests filed with the federal E-rate program, which subsidizes internet access for schools and libraries, qualify as claims under the False Claims Act, allowing a whistleblower suit to proceed against a telecommunications company.
Whistleblower Todd Heath alleged in 2008 that telecommunications provider Wisconsin Bell overcharged schools and libraries by not offering them discounted rates required under the E-rate program and submitting reimbursement requests for higher amounts than E-rate should have paid. The False Claims Act allows civilians to bring lawsuits against companies on behalf of the government when federal money is at stake.
E-rate is administered by the Universal Service Administrative Co. under the direction of the Federal Communications Commission. Wisconsin Bell argued that because the Universal Service Administrative Co. is a private, nonprofit corporation and program money comes from fees collected by service providers, its reimbursement requests didn’t qualify as claims under the False Claims Act.
Under that law, a request for money qualifies as a claim if the government “provides or has provided any portion of the money or property requested or demanded.” Justice Elena Kagan, writing for the court, rejected Wisconsin Bell’s arguments because the government provided part of the funds that schools and libraries applied for.
“In the years in which those requests were made, the Government transferred more than $100 million from the Treasury into the pool of funds used to pay E-Rate subsidies,” Kagan wrote. “That is enough to create a ‘claim’ under the Act, and to allow a suit alleging fraud to go forward.”
Wisconsin Bell’s argument that the $100 million was entirely from fees collected by carriers also overlooked the government’s role in delivering that money to the program, Kagan wrote, stating that the government was not a “passive throughway” for those funds.
The Supreme Court sent Wisconsin Bell, Inc. v. United States, ex rel. Todd Heath back to the 7th U.S. Circuit Court of Appeals for its whistleblower claims to proceed.
The Schools, Health and Libraries Broadband Coalition hailed the ruling as helping to strengthen enforcement measures and safeguard broadband funding.
“This decision is a win for schools and libraries who rely on the E-rate program for essential broadband services,” said John Windhausen, the coalition’s executive director, in a statement. “By clarifying the applicability of the False Claims Act to E-rate reimbursements, the Court helps ensure that schools and libraries are able to obtain prices that are no higher than the rates charged to similarly situated customers. This ruling helps improve the efficiency of the Universal Service Fund and the E-Rate program.”
Attorney Allyson Ho, who represented Wisconsin Bell in the case, did not immediately respond to a request for comment.
The narrow scope of the ruling, however, makes it difficult to forecast how the justices might rule on another pending E-rate matter this term. In a case consolidated from two pre-existing ones — FCC v. Consumers’ Research and Schools, Health and Libraries Broadband Coalition v. Consumers’ Research — the program’s future could be decided as the court determines the constitutionality of the funding mechanism for the FCC’s Universal Service Fund, which is overseen by USAC.
“The court was very clear in its emphasis that it has no opinion on issues regarding the constitutionality of the universal fund and of USAC’s role that it will decide in that upcoming Consumers case,” said Noelle Ellerson Ng, associate executive director of advocacy and governance for AASA, The School Superintendents Association.
Middletown, PA – Phoenix Contact engineers head back into the classroom this week to teach sixth-grade science class at Middletown Area Middle School in Middletown, Pa. The classes are part of Phoenix Contact’s National Engineers Week celebration.
Phoenix Contact has worked with the school every February since 2007. The engineers lead hands-on lessons that make science fun. The goal is to inspire young people to consider careers in science, technology, engineering, and math (STEM).
The lessons include:
“Our engineering team created this outreach program many years ago, and the partnership with Middletown Area School District has stood the test of time,” said Patty Marrero, interim vice president of human relations at Phoenix Contact. “National Engineers Week is a special time for them to share their passion for technology with students. It’s also our chance to thank our engineers for the creativity and innovations that drive our company forward.”
About Phoenix Contact
Phoenix Contact is a global market leader based in Germany. Since 1923, Phoenix Contact has created products to connect, distribute, and control power and data flows. Our products are found in nearly all industrial settings, but we have a strong focus on the energy, infrastructure, process, factory automation, and e-mobility markets. Sustainability and responsibility guide every action we take, and we’re proud to work with our customers to empower a smart and sustainable world for future generations. Our global network includes 22,000 employees in 100+ countries. Phoenix Contact USA has headquarters near Harrisburg, Pa., and employs more than 1,100 people across the U.S.
For more information about Phoenix Contact or its products, visit www.phoenixcontact.com, call technical service at 800-322-3225, or email [email protected].