Congress Blocks NIH Indirect Cost Cap, Boosts Budget to $48.7 Billion

The FY2026 appropriations package signed into law in February delivers a decisive victory for the research community: Congress rejected the Trump administration's proposed 15 percent cap on NIH indirect cost reimbursement rates and increased the agency's discretionary budget by $415 million to $48.7 billion.

The outcome ends more than a year of uncertainty that had universities scrambling to model worst-case scenarios for their research operations.

What the Indirect Cost Fight Was About

Indirect costs — also called facilities and administrative (F&A) costs — cover the infrastructure that makes federally funded research possible: lab maintenance, compliance offices, utilities, and administrative support. Each university negotiates its own rate with the federal government, typically ranging from 40 to 65 percent of direct costs.

The administration's proposed 15 percent cap would have slashed reimbursements by hundreds of millions of dollars across the higher education sector. Major research universities warned it would force lab closures and layoffs. The final spending bill not only blocks the cap but includes additional statutory language preventing changes to negotiated rates across all Department of Health and Human Services research agencies.

Congress has also directed NIH to continue discussions on the FAIR Model, an alternative approach to indirect cost funding developed by the Joint Associations Group, signaling that reform conversations will continue — but on the research community's terms rather than through unilateral executive action.

Broader Research Funding Holds Steady

Beyond the indirect cost issue, the package preserves core research infrastructure. The Institute of Education Sciences received $790 million — triple the administration's $261 million request. Pell Grants remain at $7,395 for the 2026-2027 award year. Funding for minority-serving institutions through Title III and Title V actually increased despite legal challenges.

The bill also rejected a proposed 40 percent cut to NIH's overall budget that the administration had floated in early negotiations.

What Grant Seekers Should Do Now

For principal investigators and research administrators, the message is clear: submit proposals with confidence that indirect cost rates will be honored as negotiated. Institutions that had imposed internal hiring freezes or paused new grant applications pending the budget outcome can resume normal operations.

Granted tracks federal budget developments and their impact on the research funding landscape at grantedai.com/blog.