Status of policy: Struck down

What happened? In February 2025, NIH announced it would cap reimbursement for indirect research costs to 15% for current and new grants. Although NIH said the move would save the agency $4 billion each year, it quickly drew several lawsuits from state attorneys general, higher education associations and research universities that argued the policy would undercut medical research and make the nation less competitive. 

Two months later, U.S. District Judge Angel Kelley permanently blocked the 15% cap, ruling that NIH didn’t follow proper regulatory procedures when creating it and impermissibly applied it retroactively. A federal appeals court upheld Kelley's ruling on Jan. 5.

What’s next? NIH declined to say if it intends to appeal the decision further. Since then, however, Congress blocked the agency from changing its approach to indirect research costs through Sept. 30.

Status of policy: Struck down

What happened? On April 11, the Energy Department said it would limit reimbursement of indirect research costs for colleges to 15% for new grants and terminate existing grants that don’t conform with the policy. 

“The purpose of Department of Energy funding to colleges and universities is to support scientific research — not foot the bill for administrative costs and facility upgrades,” U.S. Energy Secretary Chris Wright said in the announcement. 

A group of higher education groups and research universities sued over the new policy soon thereafter and asked a federal judge to strike it down, arguing it would “devastate scientific research.” 

On June 30, U.S. District Judge Allison Burroughs struck down the Energy Department’s policy. Burroughs ruled that the policy was arbitrary and capricious and was impermissibly retroactive.

What’s next? The Trump administration has appealed the district court’s ruling, and oral arguments are scheduled for April 7, according to Feb. 24 court documents. However, the Energy Department said in January that its policy was no longer in effect after Congress blocked the agency from changing its approach to indirect cost rates through Sept. 30 of this year.

Status of policy: Struck down

What happened? On May 2, NSF said it would limit reimbursement for research overhead to 15% for all new grants awarded to colleges, becoming the third federal agency under the Trump administration to implement a cap on indirect research costs. 

The move drew a lawsuit only a few days later from a group of research universities and higher education organizations, who argued the move oversteps the agency’s authority and threatens scientific research. The plaintiffs — which include Arizona State University and the University of Illinois — said they stand to lose tens of millions of dollars, as they often have negotiated reimbursement rates for indirect costs above 50%. 

A federal judge struck down the policy on June 20, ruling that it was “arbitrary and capricious” and didn’t align with federal law or regulations. 

What’s next? Although the Trump administration appealed the ruling last August, NSF asked to voluntarily dismiss the case in September 2025, without explaining why. The appeals court granted the motion shortly afterward. Additionally, Congress blocked the agency from changing its approach to indirect research costs through Sept. 30 of this year.

Status of policy: Vacated

What happened? On May 14, U.S. Defense Secretary Pete Hegseth issued a memo declaring that the Defense Department would move to cap reimbursement for indirect research costs to 15% for all new grants for colleges. Hegseth also ordered officials to renegotiate rates on existing awards. If colleges do not agree, DOD officials should terminate previously awarded grants and reissue them under the “revised terms,” he said. 

Overall, Hegseth estimated the move would save the agency $900 million annually. 

A group of higher education associations and research universities sued on June 16, arguing that the Defense Department overstepped its authority and noting that other courts had blocked the Trump administration’s caps at other agencies. 

“As with those policies, if DOD’s policy is allowed to stand, it will stop critical research in its tracks, lead to layoffs and cutbacks at universities across the country, badly undermine scientific research at United States universities, and erode our nation’s enviable status as a global leader in scientific research and innovation,” they wrote in court documents. 

On Oct. 10, U.S. District Judge Brian Murphy sided with the higher education groups and colleges by granting their request to vacate the policy and declare it arbitrary and capricious.

“It is contrary to law already on the books,” Murphy said. “In so finding, the Court does not write upon a blank slate but instead follows three other courts in this District who have come to similar conclusions with respect to different federal agencies’ attempts to enact virtually identical policies.”  

What’s next? The Defense Department initially appealed the ruling in early December to the 1st U.S. Circuit Court of Appeals. However, after Congress blocked the Defense Department from changing its approach to indirect cost rates through Sept. 30 of this year, the agency moved to voluntarily dismiss its appeal. The court granted the motion on Feb. 18.