The abrupt change represents “a nuclear bomb on university budgets,” says Morgan Polikoff, an education researcher at the University of Southern California. “I mean, listen, it doesn’t take a rocket scientist to figure this out. They’re just trying to hurt universities.”
The Trump administration’s plans to cut $4 billion in overhead costs for research at universities and medical centers could make a big impact on higher education research institutions.
Key Facts About the NIH Ruling
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- NIH Cap Announcement: On February 7, 2025, the National Institutes of Health (NIH) announced a 15% cap on indirect cost reimbursements for research grants. (NIH Official Notice)
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- Previous Reimbursement Rates: Universities like Penn State previously negotiated overhead rates exceeding 50% to cover research infrastructure costs.
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- Estimated Loss for Penn State: If the policy stands, Penn State could lose $35.2 million annually, with $18.3 million lost at University Park and $16.9 million at the College of Medicine. (Penn State Statement)
Penn State’s Current Overhead Rates on Federal Research
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- On-Campus Research Rate: 58.4%
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- Off-Campus Research Rate: 26.0%
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- These rates, negotiated with the federal government, help cover facilities, security, and administrative costs. (Penn State F&A Rates)
Penn State’s Response & Andrew Read’s Statement
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- Andrew Read, Senior VP for Research at Penn State, warned:
“We also know that many in our research community may be thinking about the potential for other funding agencies to take similar actions.”
(Penn State Official Response)
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- Concern: The NIH decision could set a precedent for other federal agencies affecting approximately $800 million in annual federal research funding at Penn State. If all goes from 55% overhead allotment to 15% that is a $320 million cut!!
Legal Challenges & Key Court Date
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- 22 State Attorneys General sued the Trump administration (PA not part of the suit) over the policy, arguing it violates federal law.
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- A U.S. District Judge issued a temporary block on the NIH ruling.
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- Next Hearing Date: February 21, 2025, when the court will determine the future of the policy.
Historical Context: The 2017 Attempt
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- A similar NIH cap was proposed in 2017 at 10% but was blocked by bipartisan opposition in Congress.
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- 2018 Democrats controlled the House, Republicans controlled the Senate.
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- 2025 Republicans control both the House and Senate.
Why It Matters
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- The outcome of the February 21 ruling could determine funding stability for research universities nationwide.
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- Watch for whether Congress intervenes as it did in 2018.
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- Other federal agencies may follow NIH’s lead, further impacting university research budgets.
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- Comparison with Private Foundations: Proponents of the cap highlight that many private foundations, such as the Bill & Melinda Gates Foundation, limit indirect cost rates to 10% for institutions of higher education. They argue that universities have previously accepted these lower rates, suggesting that the NIH’s 15% cap is reasonable.
Considerations for the Future
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- Project 2025: The NIH’s policy aligns with recommendations from Project 2025, a conservative “blueprint” aiming to reduce federal spending. Many recommendations of the published “playbook” clearly will impact Higher Education.
Stay informed and watch the scoreboard of federal funding decisions—these policies shape the future of medical and scientific research and impact our community. Tell us what you think below. (You can click on the text, or comment below).
7 Responses
On campus research rate at 58.4%, wow!!!! As an alumni and working my way through working in research I saw the waste and inefficiency first hand.
Thank you for highlighting this important problem for our region. The way you calculated the potential funding cut may inadvertently feed into the perception that indirect cost rates on federal grants are excessive. Penn State does not currently take 58% of the overall funding for overheads. Rather, the current $838 million per year in federal funding includes both direct and indirect costs. And not all direct costs are eligible for overheads. For example, of the $166 million in new NIH funding that Penn State received last year, only %54 million was earmarked for overheads (33% of total funding).
However, this may be besides the larger point. Indirect funds are required to fund real overhead costs of research (facilities costs, administrative staff, etc). If federal indirect rates are sharply cut, and if Penn State cannot find alternative ways to cover those real overhead costs, the true amount at stake is the entire $838 million per year in federal funding. It would just be unaffordable to do federal research here.
One other minor point: you said here that “Now (2025): Republicans control the House, Democrats control the Senate”. Of course – Republicans currently control both chambers of Congress.
Thank you for the correction on the House and Senate —the article has been updated! And your points are inciteful and we really appreciate the engagement! If you would like to author an article, we would love to post it and gain comments. Sharing information verse dialing into those on the front lines who are affected by these changes is who we desire to tell the real story. Thanks for the comment.
Your statement that (2025) Democrats control the Senate is wrong. It’s 53 Republicans and 45 Democrats and 2 Independents that side with the Dems. It’s not even close. This is easily verifiable information that I recommend you edit/change as soon as possible.
Thank you for the correction! The article has been updated. Appreciate the correction.
What is worth noting that when Trump proposed cutting overhead down to 10% in 2017 Republicans did control both Senate and Congress and in 2018 mid-terms the Democrats gained Congress. If we read the tea leaves the midterms are going to be very interesting. Thanks for you comment!!
The Democratic Party wrested control of the House of Representatives from the Republicans in the 2018 midterms. The House of Representatives has 435 voting members and six non-voting members, with the number of representatives determined by state population. 218 seats are need for control of the House of Representatives, and the Democrats won 234 seats versus the 201 seats won by Republicans.
The Republican Party kept control of the Senate by winning 11 seats. There are 100 voting members of the United States Senate, with two senators representing each state, regardless of population. 51 seats are needed for control. Senators serve six-year terms, with staggered elections. During this election cycle, 35 Senate seats were up for election. 23 Democratically held seats were not up for election, compared to 42 Republican seats not up for election.
I’m curious to know from the author and/or those feeling the pressure of proposed funding cuts….
If Penn State’s research grant funding falls dramatically, how will it impact the researchers/professors at Penn State who depend upon those grants for their livelihood?
What do you think will separate the winners (those who keep/grow their departments) from the losers (those who get the boot)?
What’s the silver lining here? How might this strengthen Penn State’s ecosystem?