The National Institutes of Health announced a 15% cap on reimbursement for universities’ and other recipients’ indirect research costs in February 2025. The policy did not remain in force: a federal appeals court unanimously affirmed a permanent injunction against it on January 5, 2026. The attempted cap was separate from NIH’s termination of more than 1,800 grants in 2025.
What NIH announced in February 2025
On February 7, 2025, NIH issued Supplemental Guidance NOT-OD-25-068. It set a standard 15% indirect-cost rate for new institutional grants and for forward expenses under existing grants, with application announced for February 10, 2025. NIH said its aim was to allow reasonable recovery of indirect costs while directing the maximum possible share of grant funds to its mission. That was the agency’s stated rationale, not an independent finding that 15% would adequately cover institutions’ costs. NIH’s notice.
The figure was a rate applied to indirect costs under the notice; it should not be read as a claim that every university would lose 15% of its overall NIH funding. The financial effect would have depended on each award and its existing negotiated rate. The available official materials do not establish a reliable institution-by-institution loss calculation or an aggregate estimate of losses from the blocked policy.
What indirect costs pay for
Direct costs are expenses that can be assigned to a particular research project. Indirect costs—also called facilities and administrative costs—support shared resources and operations that cannot readily be charged to one grant alone. Examples include facilities and administrative functions needed to conduct research.
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Before the attempted change, recipients generally relied on individually negotiated indirect-cost rate agreements. NIH’s grants policy describes negotiated rates as the usual basis for reimbursement, subject to exceptions. NIH Grants Policy Statement, section 7.4.
How the attempted cap differed from the prior approach
| Issue | Usual prior approach | February 2025 announcement |
|---|---|---|
| Rate-setting | Recipient-specific rates negotiated and recorded in rate agreements, with exceptions. | A uniform 15% indirect-cost rate. |
| Timing | Negotiated agreements associated with award periods. | NIH announced application to new grants and forward expenses on existing grants beginning February 10, 2025. |
| Legal status | Negotiated rates were the usual reimbursement basis described in NIH’s policy statement. | The notice was enjoined and vacated; the permanent injunction was affirmed on appeal. |
The First Circuit’s opinion explains the role of indirect costs and the prior negotiated-rate system. Read the January 5, 2026 appellate opinion.
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Did the 15% cap take effect?
No—not as an operative reimbursement rule. Courts blocked implementation, and the district court later entered a permanent injunction and vacated the supplemental guidance. On January 5, 2026, the First Circuit unanimously affirmed that permanent injunction. The supported current status is that the attempted cap is blocked, not that NIH is presently applying it. This ruling addresses the challenged policy; it does not establish that NIH can never make other funding or reimbursement changes. The California Attorney General’s case summary recounts the litigation and says the coalition included 22 state attorneys general. California Attorney General’s summary.
How large NIH research funding was before the announcement
For scale, NIH reported that in fiscal year 2023 it provided more than $35 billion for almost 50,000 competitive grants, supporting more than 300,000 researchers at more than 2,500 universities, medical schools, and other research institutions. NIH described approximately $26 billion as direct costs and $9 billion as indirect costs. These are FY2023 figures, not a projection of the 2025 policy’s impact or a current-year budget total. NIH’s February 2025 notice.
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One free scan finds every outdated or missing driver and matches the right update for your exact hardware.Free scan · exact hardware matchGrant terminations were a separate funding action
The attempted indirect-cost cap should not be conflated with NIH grant terminations. The U.S. Government Accountability Office reported that NIH terminated over 1,800 grants between February and June 2025. GAO also concluded that the Department of Health and Human Services violated the Impoundment Control Act when it withheld NIH funds. That finding concerns a separate line of agency action and oversight, not the First Circuit’s decision on the indirect-cost guidance. GAO’s review.
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