Congress Blocks 15% Indirect Cost Cap, Shields University Research Budgets

Congress has blocked the Trump administration's attempt to impose a flat 15% indirect-cost rate on federal research grants — a move that would have slashed billions of dollars from university research budgets and fundamentally altered how institutions fund laboratories, equipment, and support staff.

What the Administration Proposed — and What Congress Preserved

The administration's budget sought to cap indirect-cost recovery at 15% across NIH grants. Most research universities negotiate rates between 50% and 65%, reflecting the actual costs of maintaining research infrastructure: laboratory ventilation systems, compliance offices, equipment maintenance, and library subscriptions among them.

A 15% cap would have forced universities to absorb those costs from other revenue streams or curtail research operations entirely. The Consolidated Appropriations Act, 2026 protects indirect-cost rates at FY 2017 negotiated levels for NIH and at FY 2024 levels for NSF and DOE grants. While not a permanent fix — rates are frozen rather than adjusted for inflation — the provision preserves the existing framework through the current fiscal year.

Congress also rejected the administration's request to roll back forward-funding levels to FY 2024 baselines, instead capping FY 2026 forward funding at FY 2025 levels.

Forward Funding Compounds the Pressure

Universities face a compounding challenge: even with indirect-cost rates preserved, NIH's forward-funding mandate is squeezing the total number of available grants. When a five-year grant must be fully funded upfront, the indirect-cost component is also front-loaded, creating cash-flow complications for both the agency and recipient institutions.

Research administrators should model FY 2026 budgets assuming frozen indirect-cost rates and reduced grant availability. Institutions that negotiated rates above the FY 2017 baseline for NIH-funded work will need to cover the gap internally or seek supplemental funding.

Prepare for the Next Round

The indirect-cost battle will return. The administration has signaled it intends to pursue rate reform again in its FY 2027 budget request. University research offices should document the full institutional cost of federally funded research now, building the evidence base for future advocacy efforts.

Grant seekers and research administrators can track policy changes affecting research funding at grantedai.com. For deeper analysis of how indirect-cost policy shifts affect institutional budgets, visit the Granted blog.