National Science Foundation caps indirect research costs at 15% for new grants to colleges

Dive Brief: 

• The National Science Foundation said Friday that it will cap reimbursement for indirect research costs at 15% for all new grants awarded to colleges, following similar moves at two other federal agencies. 
• The new standard rate is effective May 5. NSF said the move is meant to ensure funding goes toward direct costs for scientific and engineering research, but higher education experts say it will undermine the nation’s interests. 
• Colleges have already signaled that legal challenges are likely coming down the pike. NSF’s policy change comes after the National Institutes of Health and the U.S. Department of Energy announced similar caps — both of which have since been blocked by federal courts. 

Dive Insight: 

NSF, which provides funding to industry and higher education institutions, was allocated $7.2 billion in fiscal 2024 for research and related activities. That year, the agency funded projects at 1,850 colleges and universities, meaning a cap on the indirect cost rate could have a heavy impact on the higher education sector.

College leaders at prominent research universities have already voiced concerns about the change. 

The University of Michigan on Friday said the cap would be a significant decrease from its current 56% indirect cost rate negotiated with the federal government. 

“A decrease in indirect cost payments, which help pay for the essential facilities and administration that federally funded research requires, limits our ability to produce the technologies, cures and solutions on which so many Americans rely,” said Arthur Lupia, the university’s interim vice president for research and innovation, in a campus message.

Leaders at the University of Pittsburgh also raised alarms, saying they were assessing both the financial consequences and their legal options. 

“Ultimately, the full impact of this change in the short and long term remains to be seen, but there is no doubt that our collective scholarly impact could be harmed irreparably, as could our broader mission,” Pitt Provost Joe McCarthy and other top executives said in a Sunday email to the campus community. 

Louisiana State University officials said Friday that they expect the policy to be blocked by the courts, citing the ongoing legal challenges against NIH and the Energy Department. 

In February, NIH said it would cap indirect costs at 15% for current and new grants, sparking mass outcry from the higher education sector and at least three lawsuits. Two months later, a federal judge permanently blocked NIH from implementing the policy, ruling that the agency violated regulatory requirements and constitutional prohibitions when rolling it out. 

The Trump administration has since appealed the decision. 

The Energy Department attempted to roll out a similar policy in April, but a group of colleges and higher education associations sued the agency over the move only a few days after it was announced. A federal judge temporarily blocked the department from implementing its policy later that month, ruling that colleges were likely to sustain “immediate and irreparable injury” from the rate cap. 

Higher education groups have slammed the Trump administration’s third attempt to cap the reimbursement rate at a major scientific agency. 

“The third time is not a charm; rather, it is disaster in the making for American science & technology and our nation’s continuing competitiveness,” said Matt Owens, president of COGR, an association for research universities and institutes and medical centers, in a Friday statement. 

COGR is open to working with the Trump administration to improve policies governing indirect costs and to “reduce the red tape encumbering federally sponsored research,” according to Owens. 

Kara Freeman, president and CEO of the National Association of College and University Business Officers, echoed Owens’ concerns. 

“This retrenchment is not a good deal for taxpayers,” Freeman said in a Friday statement. “The truth is that without a federal partner to share some of the costs of innovation, ground-breaking research, and other life-changing advances, these costs will fall directly and indirectly on current students or bring this vital work to a halt.”

The cap, meanwhile, comes as NSF is making other serious cuts to research, Nature recently reported. The agency has terminated some 1,425 grants over the past few weeks, threatening hundreds of millions of dollars in research, according to the publication. 

The agency also instructed staff members on April 30 to stop funding awards until further notice.