The financial impact of NIH's indirect cost cap on higher education research.

Abstract

On February 7, 2025, the National Institutes of Health (NIH) announced a policy setting all facilities and administrative (F&A) rates at 15% for grants awarded to Institutions of Higher Education (IHEs), replacing negotiated rates that often exceeded 50%. This change poses significant financial challenges for IHEs. On April 4, 2025, a permanent injunction was issued, preventing the NIH from implementing the new policy. To quantify the projected financial impact of the NIH's new F&A cap on U.S. IHEs and assess its broader implications for research sustainability. We analyzed NIH funding data from the NIH RePORTER database for Fiscal Year 2024 (FY2024). Institutions were categorized by public vs private status, and revenue losses under the new policy were calculated. State-level impacts were also assessed. NIH's F&A cap is projected to reduce IHE funding by $5.24B in FY2025. Public universities would lose $2.99B, while private universities face a $2.25B reduction. States with high research expenditures and historically high F&A rates would experience the greatest financial strains. The policy may weaken U.S. research capacity, disproportionately impact public institutions, and shift funding reliance toward state legislatures and private partnerships, with long-term consequences for biomedical innovation.