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
- 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)
- Previous Reimbursement Rates: Universities like Penn State previously negotiated overhead rates exceeding 50% to cover research infrastructure costs.
- 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
- On-Campus Research Rate: 58.4%
- Off-Campus Research Rate: 26.0%
- 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
- 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)
- 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
- 22 State Attorneys General sued the Trump administration (PA not part of the suit) over the policy, arguing it violates federal law.
- A U.S. District Judge issued a temporary block on the NIH ruling.
- Next Hearing Date: February 21, 2025, when the court will determine the future of the policy.
Historical Context: The 2017 Attempt
- A similar NIH cap was proposed in 2017 at 10% but was blocked by bipartisan opposition in Congress.
- Then (2018): Republicans controlled both the House & Senate.
- Now (2025): Republicans control the House, Democrats control the Senate.
Why It Matters
- The outcome of the February 21 ruling could determine funding stability for research universities nationwide.
- Watch for whether Congress intervenes as it did in 2018.
- Other federal agencies may follow NIH’s lead, further impacting university research budgets.
- 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
- 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).
