NIH indirect-cost cap blocked by courts

Summary

On February 7, 2025, the NIH issued Notice NOT-OD-25-068 imposing a flat 15% cap on all indirect-cost reimbursements, replacing negotiated rates that typically range from 25-65%. Courts blocked the policy; the administration abandoned its Supreme Court appeal in April 2026.

What happened

NIH's notice (effective February 10, 2025) retroactively applied a 15% overhead ceiling to all current and new grants, eliminating individually negotiated rates. Indirect costs cover facilities, utilities, lab equipment maintenance, and grant-administration staff. Three groups of plaintiffs - 22 states' AGs, and organizations representing universities, hospitals, and academic medical centers - immediately sued. Judge Angel Kelley (D. Mass.) issued a temporary restraining order in February 2025 and a permanent injunction on April 7, 2025, ruling the NIH had violated a 2018 statute, acted arbitrarily and capriciously, and applied rules retroactively. The First Circuit upheld the block on January 5, 2026. The Trump administration's deadline to petition the Supreme Court passed without action in April 2026, ending the dispute.

Impact on the United States

Universities faced projected losses of about $5.24 billion in indirect-cost support in FY2025 had the cap taken effect (Health Affairs Scholar estimate). Even the attempted implementation froze budget planning at hundreds of universities and academic medical centers, delayed hiring, and slowed clinical-trial administration.

Documented effects

1. Apr 2025Permanent injunction issued April 7, 2025; policy never took effect for existing grants[1]
2. A Health Affairs Scholar analysis projected universities would lose about $5.24 billion in indirect-cost funding in FY2025 under the cap; the court cited threatened suspension of research, including clinical trials[2][4]
3. Jan 2026First Circuit upheld the block January 5, 2026; Trump administration abandoned Supreme Court appeal April 2026[3][5]

Why this is rated limited

Would have cut an estimated $5.2B a year from university research overhead but was court-blocked and abandoned; realized harm limited to temporary budget-planning disruption.

Corrections & updates [6]

Every change to a fact on this page after publication is logged here, newest first.

1. Sep 29, 2026CorrectedFigure

   The $6.5 billion AAMC estimate and the "160+ clinical trials placed at risk" figure were attributed to a Higher Ed Dive article that contains neither; no source for them could be located. A peer-reviewed estimate (Ford and Huerta, Health Affairs Scholar, May 2025) projected about $5.24 billion in lost indirect-cost funding for universities in FY2025 under the cap; the district court cited threatened suspension of research, including clinical trials. Figures replaced accordingly.[2][4]

2. Sep 29, 2026CorrectedSource / Plaintiffs

   The First Circuit decision date (January 5, 2026) is confirmed by the court record, which is now cited; the STAT article previously cited for it does not give the date. The description of the plaintiffs as "16 higher-education associations" is not supported by the cited sources; the suits were brought by 22 state attorneys general and by organizations representing universities, hospitals and academic medical centers.[3][5]

3. Sep 29, 2026ClarifiedSource

   Higher Ed Dive is a specialist trade publication; tier label corrected from 2 to 3.[2]

4. Sep 29, 2026ClarifiedDate

   The entry gave February 10, 2025 as the date of the temporary restraining order. That exact date could not be confirmed in a source we could open (reports differ between February 10 and 11 across the three lawsuits), so the entry now says February 2025.[5]

   + Show previous and current text- Hide previous and current text

   Previously

   NIH's notice (effective February 10, 2025) retroactively applied a 15% overhead ceiling to all current and new grants, eliminating individually negotiated rates. Indirect costs cover facilities, utilities, lab equipment maintenance, and grant-administration staff. Three groups of plaintiffs - 22 states' AGs, and organizations representing universities, hospitals, and academic medical centers - immediately sued. Judge Angel Kelley (D. Mass.) issued a TRO on February 10 and a permanent injunction on April 7, 2025, ruling the NIH had violated a 2018 statute, acted arbitrarily and capriciously, and applied rules retroactively. The First Circuit upheld the block on January 5, 2026. The Trump administration's deadline to petition the Supreme Court passed without action in April 2026, ending the dispute.

   Now

   NIH's notice (effective February 10, 2025) retroactively applied a 15% overhead ceiling to all current and new grants, eliminating individually negotiated rates. Indirect costs cover facilities, utilities, lab equipment maintenance, and grant-administration staff. Three groups of plaintiffs - 22 states' AGs, and organizations representing universities, hospitals, and academic medical centers - immediately sued. Judge Angel Kelley (D. Mass.) issued a temporary restraining order in February 2025 and a permanent injunction on April 7, 2025, ruling the NIH had violated a 2018 statute, acted arbitrarily and capriciously, and applied rules retroactively. The First Circuit upheld the block on January 5, 2026. The Trump administration's deadline to petition the Supreme Court passed without action in April 2026, ending the dispute.

5. Sep 29, 2026ClarifiedSource labels

   Source tier labels brought in line with the site's tier rule (specialist and trade publications are Tier 3; general news organizations are Tier 2): STAT News (Tier 2 to 3). No claim in the entry changed.

6. Sep 29, 2026CorrectedCost estimate

   The $40M booked cost was a placeholder with no source (the block said so itself) and is removed. The cap never took effect, so nothing is booked. An unsourced $6.5B projected-harm figure and the unsupported claim that 160+ clinical trials were chilled were also replaced with the sourced Health Affairs Scholar projection (~$5.24B).

   Previously

   net $40M; 10yr $40M; 15yr $40M

   Now

   net $0; 10yr $0; 15yr $0

Sources [5]