When the National Institutes of Health recently announced that it would reduce funding for biomedical research grants, the federal agency put out a post on X highlighting three prestigious universities — Harvard, Yale, and Johns Hopkins — and their large endowments, which together total more than $100 billion. The implication was clear: Wealthy institutions, in the view of the new administration, have been taking advantage of federal funding. (Elon Musk put a finer point on things when he shared the NIH post and characterized the situation as a ripoff.)
At issue are government dollars allocated to cover the indirect costs of doing research. In 2023, the NIH — the largest public funder of biomedical research in the world — calculated that it awarded $26 billion in direct costs to scientists. That money allows scientists to pay their research team’s salaries and purchase project-specific laboratory supplies and equipment, among other things. Funding for indirect costs, meanwhile, goes to the scientist’s institution and covers shared resources like heat, air conditioning, information technology, electricity, libraries, and support staff whose work is spread across multiple departments.
Under the new policy, indirect costs would be capped at 15 percent of a grant’s total, a decrease from a historical average of around 27 percent. (The Trump administration maintains that the 15 percent cap across all institutions is consistent with the maximum percentages granted by many of the largest private philanthropic funders of research, such as the Bill and Melinda Gates Foundation.)
The future of the cuts is uncertain. Last week, U.S. District Judge Angel Kelley issued a preliminary injunction to stop the policy from being enforced. The Trump administration is expected to appeal the ruling.
Under the new policy, indirect costs would be capped at 15 percent of a grant’s total, a decrease from a historical average of around 27 percent.
The NIH announcement focused on elite universities with hefty endowments, which are also the target of House Republicans, who’ve proposed raising the excise tax levied on some annual private university endowment profits from 1.4 percent to up to 21 percent. Such institutions would take a big hit from the combination of increased taxes and decreased research funding. But they’re better able to absorb it because of other potential funding sources. Smaller NIH recipients, on the other hand, may be less able to fill the financial gaps.
Lowering the allowable indirect costs could have far-reaching effects nationwide, both in terms of reductions in research dollars allocated and economic impact. According to the NIH, every dollar it awards in grants spurs $2.46 in economic activity. If the cuts are implemented, institutions that struggle to make up the difference, including community hospitals and less wealthy universities, may have to shed employees.
Historically, indirect cost percentages have been negotiated between institutions and the federal government. Once a rate agreement is reached, it applies to all federal grants from NIH to that institution. For federal grants, indirect costs are expressed as a percent of direct costs. To illustrate, let’s suppose a grant’s total direct cost portion is $100,000 and the indirect cost rate is 50 percent. Then the total project budget is $150,000, of which indirect costs equal one-third.
In an article for The Harvard Crimson, Jeffrey S. Flier, former dean of Harvard Medical School, explained how the changes would affect HMS. With a relatively high indirect rate of 69 percent, he wrote, $74 million went to indirect costs in 2024. With the proposed changes, “almost $60 million per year would vanish.”
But NIH grants extend far beyond the elite institutions with relatively high indirect cost percentages. Throughout the country, hospitals and health systems that participate in clinical research rely heavily on NIH funds. Care New England, for instance, is a nonprofit health system in Rhode Island that includes hospitals, hospice care, and other services. In an email to Undark, Raina C. Smith, senior director of public relations, media relations, and communications for the health system wrote: “Care New England is deeply concerned about the NIH policy change,” as it “threatens critical life-saving research, medical advancements, and the financial stability of research institutions, including our hospitals. This shift will also deliver a devastating blow to local jobs within Rhode Island’s academic medical centers and hospitals.”
While some organizations might be able to fill their funding gaps with money from the private sector, not all of them can. St. Jude Children’s Research Hospital in Memphis, Tennessee, which focuses on the development of new treatments for pediatric cancers, as well as caring for sick children, could lose more than $78 million a year in funding. Charles Roberts, director of the St. Jude Comprehensive Cancer Center, told The Seattle Times that his facility alone could lose $40 million a year. He has expressed concern that reductions in funding could mean less new treatments for children and fewer children being saved.
According to data from the National Center for Education Statistics, U.S. colleges and universities had a combined total of $927 billion in endowments in fiscal year 2021, but about half of that money belonged to just 20 institutions. In other words, Harvard, Yale, and other top institutions don’t reflect the broader swath of research centers that stand to be impacted by the proposed funding changes. And beyond this, endowments aren’t a practical source of funding for overhead costs, health experts say, since many are earmarked for narrowly defined purposes or projects.
There is no political divide in terms of who gets harmed more by the budget reductions. Of the 10 states with the highest indirect cost rate, only three were solidly Democrat-led: Connecticut, New Jersey, and New York. Four were Republican-led and cast all of their electoral votes for Trump: Iowa, Kentucky, Ohio, and South Dakota.
Moreover, according to estimates provided by James S. Murphy at the nonprofit Education Reform Now, 10 states where Trump won more than 55 percent of the vote are expected to lose a cumulative $1.1 billion in funding. Of particular note, The New York Times reports that North Carolina, Missouri, and Pennsylvania, where Trump prevailed, could face disproportionate losses, because of the concentration of medical research in those states.
Harvard, Yale, and other top institutions don’t reflect the broader swath of research centers that stand to be impacted by the proposed funding changes.
Conspicuously, the University of Alabama at Birmingham, the state’s largest public employer, received more than $413 million from the NIH in fiscal year 2023. A spokesperson told Politico that the funding cuts would “result in job and economic losses” across the city. Alabama Sen. Katie Britt told a local news outlet that “a smart, targeted approach is needed in order to not hinder life-saving, groundbreaking research at high-achieving institutions like those in Alabama.”
A Louisiana Senator, Republican Bill Cassidy, was quoted by NOTUS, a Washington D.C.-based news outlet, as saying he’s “heard from my people back home that it would be very difficult for universities in Louisiana to conduct this research.” According to NOTUS, the state “received $228 million in funding from the NIH in fiscal year 2023.”
The Senate Appropriations chair, Republican Susan Collins of Maine, was more pointed in her concerns, describing the cuts as a “poorly conceived directive” that may violate federal law. Furthermore, Collins noted she had heard from several institutions in Maine that the cuts “would be devastating, stopping vital biomedical research and leading to the loss of jobs.”
As they consider ways to respond to the executive order, schools such as the University of Louisville and many others are implementing hiring freezes. And while they determine the impact of potential cuts, colleges across the country are restricting graduate student admissions.
Sarah Fortune, a professor at Harvard University’s T.H. Chan School of Public Health, wrote in an email to Undark that the planned cuts “will broadly affect all institutions undertaking the kind of complex research necessary to understand and intervene in human disease. These research programs require a complex support structure that manages the operational pieces that surround the scientist with a pipette — from human subjects protection to biosafety to financial management.”
All told, Newsweek says that institutions nationwide could lose billions of dollars, which may especially hurt research centers with less financial cushion or those that are less likely to receive grants or alternate sources of funding.