FY2026 Spending Bill Shields NIH Indirect Cost Rates From Proposed Cap

The House passed the FY2026 Labor-HHS-Education appropriations package, providing the National Institutes of Health with $48.7 billion in discretionary funding — a $415 million increase over FY2025 and a bipartisan rejection of the administration's proposed 40 percent cut. For research universities and institutions that depend on NIH grants, the most consequential provision may be language explicitly blocking a proposed 15 percent cap on indirect cost reimbursement rates.

Why the Indirect Cost Protection Matters

Indirect costs — also called facilities and administrative (F&A) costs — cover the institutional infrastructure that makes research possible: laboratory maintenance, compliance offices, research administration, and utilities. Universities negotiate these rates individually with the federal government, with many institutions recovering 50 to 60 percent or more on top of direct grant costs.

The administration had proposed capping reimbursement at 15 percent, which the American Council on Education estimated would have effectively cut billions from research institutions' operating budgets. The spending bill not only blocks this cap but includes language preventing changes to negotiated rates across all HHS research agencies.

Broader Research Funding Landscape

Beyond the indirect cost provision, the bill maintains key research and education investments. The Institute of Education Sciences receives $790 million — triple the administration's $261 million request. Programs supporting HBCUs, Hispanic-Serving Institutions, Tribal Colleges, and Minority-Serving Institutions receive funding increases across the board. The maximum Pell Grant award holds at $7,395 for the 2026-2027 academic year.

The bill now moves to the Senate, where the Appropriations Committee has signaled broad support for the funding levels.

What Research Institutions Should Prioritize

While the immediate threat to indirect cost rates has been neutralized for FY2026, the administration's proposal signals ongoing pressure on institutional overhead. Research offices should document the full cost of federally funded research infrastructure to strengthen their position in future budget debates.

What grant seekers should do now: University research offices and NIH-funded investigators should monitor the bill's Senate progress and plan budgets based on the $48.7 billion topline. Institutions should also review their negotiated F&A rates to ensure they remain current. The Granted blog offers detailed analysis of how this spending bill affects specific NIH institutes and grant mechanisms.