Several colleges and universities are pausing admissions to some graduate programs, reducing class sizes or rescinding offers to students in an effort to cut costs amid uncertainty in federal funding.
The disruption to graduate school admissions is the latest cost-cutting move for colleges. After the National Institutes of Health proposed cutting reimbursements for costs related to research, several colleges and universities said they would pause hiring and cut spending, Inside Higher Edpreviously reported. (A federal judge has blocked the NIH plan from taking effect for now.)
In recent days, the University of Pittsburgh, the University of Pennsylvania and several other institutions have stopped doctoral admissions, at least temporarily. Some colleges are pausing admissions to some programs such as in the biomedical sciences, Stat Newsreported. At others, the pause is universitywide. The University of Southern California and Vanderbilt University temporarily paused graduate student admissions, though both universities latersaid that they’d ended the pause.
A University of Pittsburgh spokesperson told WESA, a local NPR station, that the university “temporarily paused additional Ph.D. offers of admission until the impacts of that [NIH] cap were better understood … the University is in the process of completing that analysis and expects to be in a position to resume offers soon.”
Meanwhile, the University of Pennsylvania is planning to cut graduate admissions rates, The Daily Pennsylvanianreported, citing an email from the interim dean of the School of Arts and Sciences, Jeffrey Kallberg, who wrote that the cuts were a “necessary cost-saving measure” to adjust to the NIH proposal.
“This is not a step any of us wanted to take,” Kallberg wrote, according to the Daily Penn. “We recognize that graduate students are central to the intellectual life of our school—as researchers, teachers, collaborators, and future scholars. However, we must ensure that we can continue to provide strong support for those students currently in our programs and sustain the school’s core teaching and research activities.”
Tom Kimbis, executive director of the National Postdoctoral Association, wrote in an email to Inside Higher Ed that academic institutions reliant on federal funding “are being forced to make tough decisions to support these researchers in a difficult environment.”
“The decisions in Washington to pause or cease funding for science and research is impacting early-career researchers across a wide range of disciplines,” Kimbis added. “Slowing or stopping their work, on topics from cancer and Alzheimer’s research to social science issues, hurts Americans in all 50 states.”
In the last week, some faculty began tracking the reductions in the biomedical sciences via a shared spreadsheet that includes verified cuts and unverified decisions based on word of mouth and internal emails. Faculty on social media said the cuts will have long-term ramifications for sciences as fewer students enter the field. On TikTok, several students who had applied to grad school shared their dismay at how the funding cuts meant they might have to say goodbye to their career plans and research.
Accepting graduate students, particularly for Ph.D. programs and in the biomedical sciences, requires universities to make a long-term financial commitment, which is more difficult now that the NIH has stopped making new grant awards and is aiming to cut funds. Colleges receive billions from the NIH to support research. If the proposed rate cuts move forward, institutions say they would have to shut down some labs and lay off employees.
“University research and scholarship operate on a time scale of years and decades,” the Rutgers AAUP-AFT chapter wrote in a letter to New Jersey senators Cory Booker and Andy Kim. “Higher education would become impossible in the face of capricious and arbitrary withholding of funding, elimination of entire areas of grant support for critical scientific research, and cancellation of long-held contracts.”
They went on to warn that the threat to funding would diminish the country’s strength as a research superpower. “The best scientists, the best scholars, and the best students will make the rational decision to take their talents elsewhere. Once lost, the historic excellence of United States universities, including world-leading institutions in New Jersey, both public and private, will not be easily regained.”
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.
Saving or Reallocating $4B?
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.
Layoffs, Canceled Clinical Trials
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.”
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A federal judge extended an emergency restraining order Friday against theNational 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.
As mass layoffs and suspended grant reviews at National Institutes of Health sow more chaos for the nation’s once-cherished scientific enterprise, a federal judge is set to hear arguments Friday morning on whether to extend a temporary block on the NIH’s attempt to unilaterally cut more than $4 billion for the indirect costs of conducting federally funded research at universities, such as hazardous waste disposal, laboratory space and patient safety.
If the cuts move forward, they will “destroy budgets nationwide,” higher education associations and Democratic attorneys general, along with medical colleges and universities, argued in court filings this week. “But the consequences—imminent, certain, and irreparable—extend far beyond money, including lost human capital, shuttering of research projects and entire facilities, stalling or ending clinical trials, and forgoing advances in medical research, all while ending the Nation’s science leadership.”
The NIH refuted that claim in court filings, arguing that the plaintiffs “do not establish that any irreparable impacts would occur before this case can proceed to the merits.”
Friday’s hearing comes two weeks after the NIH’s Feb. 7 announcement that it will cap indirect research cost rates at 15 percent, which is down from an average rate of 28 percent, though some colleges have negotiated reimbursement rates as high as 69 percent.
The National Institutes of Health is one of the largest sources of funding for research at the universities and colleges and has supported breakthroughs in medical technology and treatments for diseases like cancer and Alzheimer’s. In fiscal year 2024, the agency sent about $26 billion to more than 500 grant recipients connected to colleges. About $7 billion of that went to the indirect expenses—a source of funding that universities argue is crucial but still doesn’t cover the full cost of conducting research.
Federal data shows that in fiscal year 2022, universities contributed approximately $25 billion of their own institutional funds to support research, including more than $6.2 billion for the federal government’s share of indirect costs that it did not reimburse.
Nonetheless, Elon Musk, the unelected billionaire bureaucrat President Donald Trump has charged with heading the nascent Department of Government Efficiency, characterized NIH reimbursements for universities for indirect research costs as “a rip-off.” Meanwhile, the academic research community warned that such drastic cuts—which Trump failed to get congressional approval for during his first term—would hamper university budgets, local economies and medical breakthroughs.
Within days of NIH’s directive, a federal judge put the rate cut on hold after 22 state attorneys general sued the agency, joined by numerous higher education research advocacy organizations, including the Association of American Medical Colleges, the Association of American Universities, the Association of Public and Land-grant Universities, and the American Council on Education. Across three separate lawsuits, they argued NIH doesn’t have the authority to unilaterally change the cap and that its guidance was “arbitrary and capricious,” among other points.
Although the nationwide injunction gave colleges a brief reprieve from the cuts, which briefly took effect Feb. 10, university administrators have spent the last two weeks sounding the alarm about the estimated losses and other impacts. Some Republicans in Congress have also opposed the plan, saying it violates language in federal legislation that bars NIH from modifying indirect costs.
‘Irreparable Injury’?
In its motion for the dismissal of the injunction filed on Feb. 14—a day before the NIH fired some 1,000 workers—lawyers for the agency argued that the federal district court “lacks jurisdiction” over the case and only federal claims court should hear the case, because the plaintiffs “are effectively seeking damages for breach of contract—the regulations incorporated into their grant agreements.” They also claimed that the NIH “ran afoul of no statute” and that the plaintiffs “have failed to show that they would suffer an irreparable injury” without a temporary restraining order.
“Where declarants assert that reducing funds is likely to harm research or clinical trials,” the motion said, “they generally do not assert that those harms are imminent as opposed to eventual reductions in their capacity that would occur from sustained diminished funding after a ruling on the merits.”
The motion went on to claim that the NIH’s capping of indirect cost rates seeks to “further its mission of advancing public health in a manner reflecting wise stewardship of the public money entrusted to it,” claiming that indirect costs are “difficult” for NIH to oversee. “To be clear, the Supplemental Guidance will not change NIH’s total grant spending; rather, it simply reallocates that grant spending away from indirect costs and toward the direct funding of research.”
But that’s not how the NIH publicly framed the indirect cost cap in a post on the social media site Musk owns that said the policy change will “save more than $4B a year effective immediately.”
And in a response filed earlier this week, the plaintiffs argued that the NIH’s policy change “bears no rational connection to NIH’s stated goal” in its court filings, because nothing in the NIH’s notice to cap indirect costs “directs more money to direct expenses.” The response also argues that the NIH has not provided adequate evidence to support its assertions that indirect costs are “difficult to oversee” and implored the court to reject the NIH’s attempt to “deprive Congress of its power of the purse.”
Mass Layoffs, Grant Reviews Still Suspended
While the temporary injunction has halted the rate cap for about two weeks, it hasn’t stopped Trump and Musk from destabilizing federal science agencies in other ways. Over the past week, thousands of mostly probationary employees—ranging from top-ranking agency officials to grant administrators who help grantees ensure their projects are compliant with federal regulations—across numerous science agencies, including the NIH, the National Science Foundation and the Centers for Disease Control and Prevention, lost their jobs.
“The majority of what people who work for those agencies do is get the grant money out the door,” said Carrie Wolinetz, a science and health policy consultant who worked for the NIH between 2015 and 2023. “Because the layoffs took place across job categories, any of those critical positions could be affected. It’s hard to imagine that’s not going to have some impact on the ability of those agencies to fulfill its mission of getting those grants out the door.”
And even before the layoffs and indirect cost cap directive, the NIH had already derailed its operations by temporarily pausing communication and grant reviews last month. Although the courts put those orders on hold, Nature reported Thursday that nearly all NIH grant-review meetings remain suspended.
When the reviews finally do resume, the process will likely face even more challenges with fewer agency employees.
“The fewer people, the greater the bottleneck,” Wolinetz said. “Uncertainty itself causes delays. When people are confused, afraid and worried after watching their colleagues being dismissed, all of that just causes a slowing down of the entire system.”
On Wednesday, hundreds of scientists, federal workers and their supporters rallied outside of Department of Health and Human Services headquarters in Washington, D.C., wielding signs with phrases such as “Leash That DOGE,” “Fight for Science” and “America Needs NIH Scientists” and speaking out against cuts to science funding. (The rally was part of a national day of action to oppose the research funding cuts and layoffs.)
Hundreds of protesters gathered in front of HHS headquarters Wednesday.
“It is important that we understand exactly what is at stake right now,” Kailyn Price, a neuroscience doctoral student at George Washington University, told the crowd. “Cutting indirect costs is like telling a football team to do their work with only the players and the coach—no lights for the field, no physical therapist for the players, no water for the showers.”
She said casting indirect costs as an unchecked and unnecessary burden on taxpayers is all part of the government’s plan to turn the American public against scientists and their work.
“They want you to be angry and misinformed, incensed and ignorant,“ Price said. “Trump and his unelected billionaire backers want you to look at the people like us—making $20, $30, $40,000 a year, working late nights through the weekends because we believe that much in the work that we do—as the enemy.”
And the federal workers who remain at the agencies that support university research may not be there for long, either.
“Messaging from the agency is changing on a daily basis. Everyone is internally freaking out,” one still-employed NIH scientist told Inside Higher Ed on the condition of anonymity. “I’m applying for other jobs, and most people are hedging their bets and sending out other applications, assuming they could get let go.”
The chaos at the NIH, including the firings and the potential for billions in funding cuts, means “there just won’t be the same number of scientists coming out of American universities,” the NIH researcher said. “On the bright side, though, there is the rest of the world.”
The cuts “are also adversely affecting important agency functions, such as support for research security at universities,” Toby Smith, senior vice president for government relations and public policy at the AAU, said in an email.
“Cutting key research security offices at the NSF and NIH will make it more difficult for universities and our science agencies to implement new congressionally mandated research security requirements aimed at protecting sensitive information and data from competitors at a crucial time when we are trying to stay at the forefront of global scientific leadership.”
The number of states that sued to block the National Institutes of Health from implementing cuts to funding for indirect research costs. Earlier this week, U.S. District Court Judge Angel Kelley issued restraining orders against the cuts in the attorneys general-led case, along with a similar one filed by the Association of American Medical Colleges and other groups.
Indirect cost recovery (ICR) seems like a boring, technical budget subject. In reality, it is a major source of the long-running budget crises at public research universities. Misinformation about ICR has also confused everyone about the university’s public benefits.
These paired problems—concealed budget shortfalls and misinformation—didn’t cause the ICR cuts being implemented by the NIH acting director, one Matthew J. Memoli, M.D. But they are the basis of Memoli’s rationale.
Trump’s people will sustain these cuts unless academics can create an honest counternarrative that inspires wider opposition. I’ll sketch a counternarrative below.
The sudden policy change is that the NIH is to cap indirect cost recovery at 15 percent of the direct costs of a grant, regardless of the existing negotiated rate. Multiple lawsuits have been filed challenging the legality of the change, and courts have temporarily blocked it from going into effect.
Memoli’s notice of the cap, issued Friday, has a narrative that is wrong but internally coherent and plausible.
It starts with three claims about the $9 billion of the overall $35 billion research funding budget that goes to indirect costs:
Indirect cost allocations are in zero-sum competition with direct costs, therefore reducing the total amount of research.
Indirect costs are “difficult for NIH to oversee” because they aren’t entirely entailed by a specific grant.
“Private foundations” cap overhead charges at 10 to 15 percent of direct costs and all but a handful of universities accept those grants.
Memoli offers a solution: Define a “market rate” for indirect costs as that allowed by private foundations (Gates, Chan Zuckerberg, some others). The implication is the foundations’ rate captures real indirect costs rather than inflated or wishful costs that universities skim to pad out bloated administrations. On this analytical basis, currently wasted indirect costs will be reallocated to useful direct costs, thus increasing rather than decreasing scientific research.
There’s a false logic here that needs to be confronted.
The strategy so far to resist these cuts seems to focus on outcomes rather than on the actual claims or the underlying budgetary reality of STEM research in the United States. Scientific groups have called the ICR rate cap an attack on U.S. scientific leadership and on public benefits to U.S. taxpayers (childhood cancer treatments that will save lives, etc.). This is all important to talk about. And yet these claims don’t refute the NIH logic. Nor do they get at the hidden budget reality of academic science.
On the logic: Indirect costs aren’t in competition with direct costs because direct and indirect costs pay for different categories of research ingredients.
Direct costs apply to the individual grant: costs for chemicals, graduate student labor, equipment, etc., that are only consumed by that particular grant.
Indirect costs, also called facilities and administrative (F&A) costs, support infrastructure used by everybody in a department, discipline, division, school or university. Infrastructure is the library that spends tens of thousands of dollars a year to subscribe to just one important journal that is consulted by hundreds or thousands of members of that campus community annually. Infrastructure is the accounting staff that writes budgets for dozens and dozens of grant applications across departments or schools. Infrastructure is the building, new or old, that houses multiple laboratories: If it’s new, the campus is still paying it off; if it’s old, the campus is spending lots of money keeping it running. These things are the tip of the iceberg of the indirect costs of contemporary STEM research.
In response to the NIH’s social media announcement of its indirect costs rate cut, Bertha Madras had a good starter list of what indirects involve.
Screenshot via Christopher Newfield
And there are also people who track all these materials, reorder them, run the daily accounting, etc.—honestly, people who aren’t directly involved in STEM research have a very hard time grasping its size and complexity, and therefore its cost.
As part of refuting the claim that NIH can just not pay for all this and therefore pay for more research, the black box of research needs to be opened up, Bertha Madras–style, and properly narrated as a collaborative (and exciting) activity.
This matter of human activity gets us to the second NIH-Memoli claim, which involves toting up the processes, structures, systems and people that make up research infrastructure and adding up their costs. The alleged problem is that it is “difficult to oversee.”
Very true, but difficult things can and often must be done, and that is what happens with indirect costs. Every university compiles indirect costs as a condition of receiving research grants. Specialized staff (more indirect costs!) use a large amount of accounting data to sum up these costs, and they use expensive information technology to do this to the correct standard. University staff then negotiate with federal agencies for a rate that addresses their particular university’s actual indirect costs. These rates are set for a time, then renegotiated at regular intervals to reflect changing costs or infrastructural needs.
The fact that this process is “difficult” doesn’t mean that there’s anything wrong with it. This claim shouldn’t stand—unless and until NIH convincingly identifies specific flaws.
As stated, the NIH-Memoli claim that decreasing funding for overhead cuts will increase science is easily falsifiable. (And we can say this while still advocating for reducing overhead costs, including ever-rising compliance costs imposed by federal research agencies. But we would do this by reducing the mandated costs, not the cap.)
The third statement—that private foundations allow only 10 to 15 percent rates of indirect cost recovery—doesn’t mean anything in itself. Perhaps Gates et al. have the definitive analysis of true indirect costs that they have yet to share with humanity. Perhaps Gates et al. believe that the federal taxpayer should fund the university infrastructure that they are entitled to use at a massive discount. Perhaps Gates et al. use their wealth and prestige to leverage a better deal for themselves at the expense of the university just because they can. Which of these interpretations is correct? NIH-Memoli assume the first but don’t actually show that the private foundation rate is the true rate. (In reality, the second explanation is the best.)
This kind of critique is worth doing, and it can be expanded. The NIH view reflects right-wing public-choice economics that treat teachers, scientists et al. as simple gain maximizers producing private, not public goods. This means that their negotiations with federal agencies will reflect their self-interest, while in contrast the “market rate” is objectively valid. We do need to address these false premises and bad conclusions again and again, whenever they arise.
However, this critique is only half the story. The other half is the budget reality of large losses on sponsored research, all incurred as a public service to knowledge and society.
Take that NIH image above. It makes no logical sense to put the endowments of three very untypical universities next to their ICR rates: They aren’t connected. It makes political narrative sense, however: The narrative is that fat-cat universities are making a profit on research at regular taxpayers’ expense, and getting even fatter.
The only way to deal with this very effective, very entrenched Republican story is to come clean on the losses that universities incur. The reality is that existing rates of indirect cost recovery do not cover actual indirect costs, but require subsidy from the university that performs the research. ICR is not icing on the budget cake that universities can do without. ICR buys only a portion of the indirect costs cake, and the rest is purchased by each university’s own institutional funds.
For example, here are the top 16 university recipients of federal research funds. One of the largest in terms of NIH funding (through the Department of Health and Human Services) is the University of California, San Francisco, winning $795.6 million in grants in fiscal year 2023. (The National Science Foundation’s Higher Education Research and Development (HERD) Survey tables for fiscal year 2023 are here.)
UCSF’s negotiated indirect cost recovery rate is 64 percent. This means that it has shown HHS and other agencies detailed evidence that it has real indirect costs in something like this amount (more on “something like” in a minute). It means that HHS et al. have accepted UCSF’s evidence of their real indirect costs as valid.
If the total of UCSF’s HHS $795.6 million is received with a 64 percent ICR rate, this means that every $1.64 of grant funds has $0.64 in indirect funds and one dollar in direct. The math estimates that UCSF receives about $310 million of its HHS funds in the form of ICR.
Now, the new NIH directive cuts UCSF from 64 percent to 15 percent. That’s a reduction of about 77 percent. Reduce $310 million by that proportion and you have UCSF losing about $238 million in one fell swoop. There’s no mechanism in the directive for shifting that into the direct costs of UCSF grants, so let’s assume a full loss of $238 million.
In Memoli’s narrative, this $238 million is the Reaganite’s “waste, fraud and abuse.” The remaining approximately $71 million is legitimate overhead as measured (wrongly) by what Gates et al. have managed to force universities to accept in exchange for the funding of their researchers’ direct costs.
But the actual situation is even worse than this. It’s not that UCSF now will lose $238 million on their NIH research. In reality, even at (allegedly fat-cat) 64 percent ICR rates, they were already losing tons of money. Here’s another table from the HERD survey.
There’s UCSF in the No. 2 national position, a major research powerhouse. It spends more than $2 billion a year on research. However, moving across the columns from left to right, you see federal government, state and local government, and then this category, “Institution Funds.” As with most of these big research universities, this is a huge number. UCSF reports to the NSF that it spends more than $500 million a year of its own internal funds on research.
The reason? Extramurally sponsored research, almost all in science and engineering, loses massive amounts of money even at current recovery rates, day after day, year in, year out. This is not because anyone is doing anything wrong. It is because the infrastructure of contemporary science is very expensive.
Here’s where we need to build a full counternarrative to the existing one. The existing one, shared by university administrators and Trumpers alike, posits the fiction that universities break even on research. UCSF states, “The University requires full F&A cost recovery.” This is actually a regulative ideal that has never been achieved.
The reality is this:
UCSF spends half a billion dollars of its own funding to support its $2 billion total in research. That money comes from the state, from tuition, from clinical revenues and some—less than you’d think—from private donors and corporate sponsors. If NIH’s cuts go through, UCSF’s internal losses on research—the money it has to make up—suddenly jump from an already-high $505 million to $743 million in the current year. This is a complete disaster for the UCSF budget. It will massively hit research, students, the campuses’ state employees, everything.
The current strategy of chronicling the damage from cuts is good. But it isn’t enough. I’m pleased to see the Association of American Universities, a group of high-end research universities, stating plainly that “colleges and universities pay for 25 percent of total academic R&D expenditures from their own funds. This university contribution amounted to $27.7 billion in FY23, including $6.8 billion in unreimbursed F&A costs.” All university administrations need to shift to this kind of candor.
Unless the new NIH cuts are put in the context of continuous and severe losses on university research, the public, politicians, journalists, et al. cannot possibly understand the severity of the new crisis. And it will get lost in the blizzard of a thousand Trump-created crises, one of which is affecting pretty much every single person in the country.
Finally, our full counternarrative needs a third element: showing that systemic fiscal losses on research are in fact good, marvelous, a true public service. A loss on a public good is not a bad and embarrassing fact. Research is supposed to lose money: The university loses money on science so that society gets long-term gains from it. Science has a negative return on investment for the university that conducts it so that there is a massively positive ROI for society, of both the monetary and nonmonetary kind. Add up the education, the discoveries, the health, social, political and cultural benefits: The university courts its own endless fiscal precarity so that society benefits.
We should also remind everyone that the only people who make money on science are in business. And even there, ROI can take years or decades. Commercial R&D, with a focus on product development and sales, also runs losses. Think of “AI”: Microsoft alone is spending $80 billion on it in 2025, on top of $50 billion in 2024, with no obviously strong revenues yet in sight. This is a huge amount of risky investment—it compares to $60 billion for federal 2023 R&D expenditures on all topics in all disciplines. I’m an AI skeptic but appreciate Microsoft’s reminder that new knowledge means taking losses and plenty of them.
These up-front losses generate much greater future value of nonmonetary as well as monetary kinds. Look at the University of Pennsylvania, the University of Wisconsin at Madison, Harvard University, et al. in Table 22 above. The sector spent nearly $28 billion of its own money generously subsidizing sponsors’ research, including by subsidizing the federal government itself.
There’s much more to say about the long-term social compact behind this—how the actual “private sector” gets 100 percent ICR or significantly more, how state cuts factor into this, how student tuition now subsidizes more of STEM research than is fair, how research losses have been a denied driver of tuition increases. There’s more to say about the long-term decline of public universities as research centers that, when properly funded, allow knowledge creation to be distributed widely in the society.
But my point here is that opening the books on large everyday research losses, especially biomedical research losses of the kind NIH creates, is the only way that journalists, politicians and the wider public will see through the Trumpian lie about these ICR “efficiencies.” It’s also the only way to move toward the full cost recovery that universities deserve and that research needs.
UPDATE: Feb. 11, 2025: A federal judge late Monday barred the National Institutes of Health from enforcing massive cuts to grant funding for researchers’ indirect costs, a move widely decried by universities and other research institutions.
U.S. District Judge Angel Kelley issued restraining orders in two separate cases filed earlier Monday against NIH, including one by 22 state attorneys general and another by the Association of American Medical Colleges and other groups. A third lawsuit — brought by the Association of Public and Land-grant Universities, the American Council on Education and the Association of American Universities — was also filed late Monday.
Regarding the AAMC case, Kelley wrote that plaintiffs would “sustain immediate and irreparable injury” without a restraining order against the NIH funding cap. Along with restraining orders, Kelley required NIH to provide biweekly status reports confirming regular disbursements.
Dive Brief:
A coalition of 22 attorneys general filed a lawsuit in federal court on Monday seeking to block the National Institutes of Health’s newly announced research funding cuts.
Research institutions have previously negotiated individual indirect cost rates, with an average of 27% to 28%, NIH said. Organizations, universities and researchers quickly raised alarms about the cuts, warning they could hurt important medical research and the economy.
Dive Insight:
NIH framed its unilateral decision to cut indirect costs as bringing them in line with practices at nonprofits such as the Gates Foundation, which caps indirect costs at 10% for higher education institutions, and the Rockefeller Foundation, which sets a 15% ceiling for colleges and universities.
In a Friday memo outlining the new policy, the agency said the new cap would “allow grant recipients a reasonable and realistic recovery of indirect costs while helping NIH ensure that grant funds are, to the maximum extent possible, spent on furthering its mission.”
The same day, the agency flagged on the social media platform X the “old” indirect cost rates negotiated by Harvard University, Yale University and Johns Hopkins University — which are all between 63.7% and 69% — as well as those institutions’ endowments ranging from $13 billion to $53 billion.
NIH noted that of the $35 billion it spent on grants in fiscal 2023 to universities, medical schools and other research institutions, about $26 billion went to direct research and $9 billion went to overhead in the form of indirect costs.
Sen. Patty Murray, a Washington Democrat, described NIH’s move as an illegal violation of an appropriations bill that prohibits modifications to NIH’s indirect cost funding. Murray also said that the move will shift costs onto states rather than reducing them.
In their lawsuit, the attorneys general argued, “Without relief from NIH’s action, these institutions’ cutting-edge work to cure and treat human disease will grind to a halt.”
They pointed to the legislation flagged by Murray that protected indirect reimbursements: During President Donald Trump’s first term, his administration in 2017 included a 10% cap in its budget proposal, but Congress responded the next year with an appropriations provision prohibiting NIH from modifying reimbursement rates, the lawsuit said.
Filed in U.S. District Court in Massachusetts, the 59-page lawsuit — brought overwhelmingly by Democrat-led states —seeks both preliminary and permanent injunctions blocking NIH from enforcing the rate cap.
Many in the higher education sector reacted with dismay over NIH’s move.
The decision “sabotages the decades-long partnership that has ensured U.S. global leadership in life-saving medical research,” American Council on Education President Ted Mitchell said in a statement on Friday.
“This decision is short-sighted, naive, and dangerous,” Mitchell added. “It is a self-inflicted wound that, if not reversed, will have dire consequences on U.S. jobs, global competitiveness, and the future growth of a skilled workforce.”
“NIH slashing the reimbursement of research costs will slow and limit medical breakthroughs that cure cancer and address chronic diseases such as diabetes and heart disease,” Becker said in a statement. APLU noted that funded indirect costs include patient safety, research security and hazardous waste disposal.
Jeremy Day, director of the University of Alabama at Birmingham’s Comprehensive Neuroscience Center, said on social media that NIH’s cut would “cripple research infrastructure at hundreds of US institutions, and threatens to end our global superiority in scientific research.”
Meanwhile, institutions are grappling with what it means for their research programs going forward. The University of Michigan, for instance, said in a statement that NIH’s indirect cost funding supports development and maintenance of its laboratories as well as information technology and administrative support for regulatory compliance.
“This change would result in a significant decrease in the amount that U-M receives from the federal government to conduct vital research,” the university said.
Others echoed the warning. In a statement, the University of Wisconsin-Madison said NIH’s directive would “significantly disrupt vital research activity and delay lifesaving discoveries and cures.”
“Indirect costs contribute to everything from utilities charges to building out the laboratories where science is done, to infrastructure for clinical trials of new medicines and treatments,” the university said.
In a move that sparked swift outrage from the higher education sector, the National Institutes of Health announced late Friday that it is dramatically cutting funding for grant recipients’ “indirect costs” of conducting medical research at universities, including hazardous waste disposal, utilities and patient safety.
“It is difficult to overstate what a catastrophe this will be for the US research and education systems, (particularly) in biomedical fields,” Carl Bergstrom, a biology professor at the University of Washington, posted on Bluesky. “It is deliberate and wanton devastation entirely out of scale with any concern about DEI activities on campuses. The goal is destroy US universities.”
Effective Monday, the NIH is planning to cap funding of indirect costs at 15 percent of all grants, down from the average of 27 to 28 percent. The change means that colleges and universities are on the hook for millions of dollars. They’ll likely have to cut their budgets or reduce research activities to make up the difference.
Republicans and President Trump have long sought to limit funding for indirect costs. The latest proposal is similar to a recommendation included in Project 2025, a conservative playbook for the second Trump administration that the president has disavowed. Project 2025 authors said the cap would “reduce federal taxpayer subsidization of leftist agendas.”
Last year, $9B of the $35B that the National Institutes of Health (NIH) granted for research was used for administrative overhead, what is known as “indirect costs.” Today, NIH lowered the maximum indirect cost rate research institutions can charge the government to 15%, above… pic.twitter.com/FSUYpEGKsr
Historically, universities have been able to negotiate reimbursement rates for those indirect costs, with institutional reimbursements averaging nearly 28 percent. Some of the nation’s leading research institutions, including Harvard, Yale and Johns Hopkins Universities, receive reimbursements of more than 60 percent. NIH said in a social media post that it expects to save $4 billion from the change; an Inside Higher Ed analysis of fiscal year 2024 grant data shows that colleges would lose about $4.3 billion in NIH reimbursements if indirect costs were capped at 15 percent.
Previously, if a college or university received a $5 million grant, they could also be reimbursed up to $1.4 million to pay for related costs, such as renting space for a lab. Under this new policy, that will be capped at $750,000.
“The United States should have the best medical research in the world,” the NIH said in its announcement. “It is accordingly vital to ensure that as many funds as possible go towards direct scientific research costs rather than administrative overhead.”
While the NIH said it has the authority to cap indirect costs, Senator Patty Murray, a Democrat from Washington, said on social media Friday that the proposal is illegal.
“It will mean shuttering labs across the country, layoffs in red & blue states, & derailing lifesaving research on everything from cancer to opioid addiction,” Murray wrote.
Cuts to ‘Life-Saving’ Research
While the NIH is casting indirect costs as a burden, Association of American Universities President Barbara R. Snyder said in a statement that they are “real and necessary costs of conducting the groundbreaking research that has led to countless breakthroughs in the past decades.”
A $4 billion cut to reimbursements for NIH grants, she added, “is quite simply a cut to the life-saving medical research that helps countless American families.”
NIH has worked feverishly in recent weeks to comply with President Trump’s executive orders to eliminate all support for diversity, equity and inclusion and “gender ideology.” Grant reviews stopped for two weeks, alarming researchers who rely on federal funding, and some scientists worried about the future of their funding under the agency.
But researchers and their advocates say an abrupt $4 billion cut to NIH funding—which has not been approved by Congress—has dire implications for the future of the United State’s scientific research enterprise and will undermine the NIH’s stated goal of producing superior medical research.
“Cuts to reimbursement of these costs are cuts to medical research and represent the federal government stepping back from commitments it has made to world-leading researchers,” Mark Becker, president of the Association of Public Land Grant Universities, said in a statement. “This action will slow advances for millions of patients who desperately need critical breakthroughs and imperil the U.S.’s position as the world leader in biomedical innovation.”
The NIH is the largest federal funding source for research universities, and has supported breakthroughs in medical technology and treatments for diseases like cancer and Alzheimer’s.
Ted Mitchell, president of the American Council on Education, said the decision was “short-sighted, naive, and dangerous.”
“It will be celebrated wildly by our competitors, who will see this for what it is—a surrender of U.S. supremacy in medical research,” Mitchell said. “It is a self-inflicted wound that, if not reversed, will have dire consequences on U.S. jobs, global competitiveness, and the future growth of a skilled workforce.”
Some of President Donald Trump’s executive orders ban funding to diversity, equity and inclusion programs or activities as well as the promotion of so-called gender ideology.
Anna Moneymaker/Getty Images
The Trump administration on Wednesday walked back its plan to freeze trillions in federal grants and loans, though a review of thousands of federal programs continues, along with a pause on grant reviews at the National Science Foundation and National Institutes of Health.
A federal judge blocked the plan from taking effect Tuesday night, but the proposal, outlined in a two-page memo, raised a number of questions and concerns from higher ed leaders who warned of devastating consequences. Had the order taken effect, it could have cut off millions in federal aid to colleges, though not federal student loans or Pell Grants. Congressional Democrats and others called the decision to rescind the memo a victory but criticized the Trump administration for causing chaos and confusion.
White House press secretary Karoline Leavitt said on social media that rescinding the memo was “not a rescission of the federal funding freeze,” adding that “the president’s [executive orders] on federal funding remain in full force and effect and will be rigorously implemented.”
So, the White House is still moving forward with plans to stop funding programs that are at odds with the president’s executive orders. In the last week, President Trump has issued executive orders that banned funding for diversity, equity and inclusion programs and “gender ideology” as well as cracked down on illegal immigration, among other issues.
In order to comply with those orders, the National Science Foundation halted grant reviews this week, even before the memo from the Office of Management and Budget. The National Institutes of Health also canceled meetings key to reviewing research grant applications.
The disruption to federal research funding has set university researchers and scientists on edge, and the grant reviews are still on hold, according to numerous sources within the academic research community. On Wednesday, the National Science Foundation said its top priority was to resume funding actions.
“We are working expeditiously to conduct a comprehensive review of our projects, programs and activities to be compliant with the existing executive orders,” a statement posted online reads.
NSF said that all grantees must comply with the orders and cease “all non-compliant grant and award activities.”
“In particular, this may include, but is not limited to conferences, trainings, workshops, considerations for staffing and participant selection, and any other grant activity that uses or promotes the use of diversity, equity, inclusion and accessibility (DEIA) principles and frameworks or violates federal anti-discrimination laws,” the statement said. “Please work with your institutional research office to assist you in complying with the executive orders.”
In addition to the temporary pause, the Office of Management and Budget ordered federal agencies to review more than 2,600 programs by Feb. 7 to ensure they comply with the executive orders. It’s unclear whether that deadline remains now that OMB rescinded the memo.
At the Education Department, programs subject to review include TRIO, Pell Grants, student loans and grants for childcare on campus, as well as those that support students with disabilities and minority-serving institutions. Currently, neither the $229 million fund for Hispanic-serving institutions nor the $400 million grant program for historically Black colleges and universities is included in the review.
As part of the review, agencies will have to answer a series of questions for each program, including whether the programs fund DEI, support “illegal aliens” or promote “gender ideology.”
For programs that might not comply with the executive orders, OMB officials wrote in further guidance sent Tuesday that agency leaders could consult the office “to begin to unwind these objectionable policies without a pause in the payments.”
Orders to freeze travel, meetings, communications and hiring at the National Institutes of Health—and all other agencies within the Department of Health and Human Services—has some federally funded researchers on edge just days into President Donald Trump’s second term.
Scholars say they’ve received emails canceling key meetings that determine which research projects to fund and they’re worried about how those and other disruptions could stall the billions of dollars in NIH-funded projects universities oversee.
“I suspect that folks outside the sciences don’t understand just how disruptive even a short delay in funding decisions can be,” Adam Forte, an associate professor of geology at Louisiana State University who runs his own lab, posted on BlueSky Thursday alongside numerous other concerned scholars. “This is how we lose huge amounts of scientific capacity, scientific capacity we as a collective have already invested huge amounts of time and money in, just lighting it on fire to watch the flames.”
If they leave, it’s not like there is much chance they’re coming back to that, or a similar position. That expertise is just gone as they are forced to move onto something else to pay the bills. A spectacular waste from a “short” delay in the machinery that funds science. 5/6
Some research policy experts say a pause is typical for the initial days of a new administration and that it’s too soon to tell whether this week’s order is a cause for concern. Others, however, are interpreting it as part of a larger message from Trump, who has repeatedly undermined scientific findings about COVID-19 and climate change and nominated Robert F. Kennedy Jr., who falsely claims there are no safe or effective vaccines, to lead the HHS.
While Kennedy, who previously vowed to enact mass layoffs at the NIH, and Trump’s other cabinet nominees await Senate confirmation, Trump has already issued a blitz of executive orders—including some that roll back diversity and environmental justice initiatives, as well as protections for federal workers and immigrants—since retaking the White House Monday. (In addition to those in HHS, all federal agencies are also under a hiring freeze.)
“It’s not unheard-of to see some things paused when a new administration takes over, but when we look at the whole package of language and executive orders that have come out this week, they’re all tied up together,” said Jennifer Jones, director of the Center for Science and Democracy at the Union of Concerned Scientists. “The goal is to intimidate, chill and create this exact sort of fear.”
A Communications Freeze
That fear for NIH-affiliated researchers came after Dorothy Fink, acting secretary of HHS, sent a memo Tuesday to all HHS division heads, including the directors of the NIH, the Centers for Disease Control and Prevention, and the Food and Drug Administration.
“As the new administration considers its plan for managing the federal policy and public communications processes, it is important that the President’s appointees and designees have the opportunity to review and approve any regulations, guidance, documents, and other public documents and communications (including social media),” explained the memo, which instructed agency employees to refrain from numerous forms of communications, including issuing grant award announcements and public speaking, until a presidential appointee can review them. The memo is in effect until Feb. 1.
An NIH spokesperson clarified to Inside Higher Ed via email that the restrictions apply to communication “not directly related to emergencies or critical to preserving health,” and that any “exceptions for announcements that HHS divisions believe are mission critical” will be made “on a case-by-case basis.”
On Wednesday, Glenda Conroy, a senior travel official for NIH, emailed NIH employees notifying them that all sponsored travel for HHS employees is also suspended until further notice.
Disruptions to Research
As of right now, all these restrictions mean that scheduled meetings have been canceled or postponed, including NIH study sections, which convene scientific experts to decide which projects to fund.
And university-affiliated researchers make up a sizable portion of the grant application pool. The $44 billion NIH is the largest federal research funding source for colleges and universities, which receive billions in NIH grants each year to support medical and other scientific research projects, including those that have advanced treatments for common diseases such as cancer and Alzheimer’s.
Chrystal Starbird, an assistant professor of biology and a cancer researcher at the University of North Carolina at Chapel Hill’s School of Medicine, had been planning for months to attend a study section next week where nearly 60 grants were set to be reviewed, but she got word a couple of days ago that it was canceled.
“Ultimately, the NIH will continue to function, so maybe it’s not a huge issue, but for the people being reviewed now it is,” she said. “None of those grants will be reviewed on time. The question is: How are they going to get all of us together again to review the grant?”
And rescheduling the study sections for weeks or months after the communication restrictions lift may disrupt certain ongoing projects.
“Some people may be using this funding to do research that may have more time pressure,” Starbird said, noting that clinical research typically adheres to strict patient-monitoring timelines. “We have to acknowledge that there’s already a significant impact from this pause.”
‘Too Soon to Assume’ Worst-Case Scenario?
Carrie Wolinetz, a science and health policy consultant who worked for the NIH between 2015 and 2023, said in an email that the communications freeze is similar to memos from previous transitions. Although she acknowledged that pausing study section meetings seems broader than previous transitions, it doesn’t strike her “as tremendously outside the norm of activities that might be paused while a new team is transitioning.”
And though it’s understandable that all of these restrictions are “causing anxiety,” she said it’s “too soon to assume that worst case scenario.”
“It becomes a concern if there is a long cessation of activity, of the sort you might experience if there was an extended government shutdown,” she said. “There is likely to be minimal impact in the short term—other than for folks who hopped on flights only to discover their meeting was cancelled, which I imagine was pretty irritating.”
But others caution that having such restrictions in place for even a short time could force people out of their jobs, create a talent void and potentially stall innovation.
“Even if this is short-lived bumpiness, the uncertainty in funding can have career-altering implications, especially for young scientists,” Erica Goldman, a former academic and director of policy entrepreneurship for the Federation of American Scientists, said in an email.
“If conferences or travel are canceled, for example, the inability to present new ideas and network with senior colleagues can have cascading effects,” she continued. “I’m reminded of the experiments, data, and professionals who left the field during COVID-19. Even temporary pauses can have lasting consequences.”
