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Proposed cuts to federal health research reimbursement rates and other changes have created financial worries for universities.
Photo illustration by Justin Morrison/Inside Higher Ed | alvarez/E+/Getty Images | Rawpixel
Facing financial unknowns associated with President Donald Trump’s attempted overhaul of higher education—including proposed caps on federal health research funding—universities are scrambling to minimize the financial fallout.
Even some of the wealthiest universities in the nation have already frozen hiring, paused graduate admissions and taken other actions as officials estimate the potential damage if the National Institutes of Health plan to cap reimbursements for indirect research costs moves ahead. Currently the Trump administration’s plan to cap indirect expenses at 15 percent of direct research costs is on hold after a federal judge blocked the move amid a legal challenge.
The administration has justified the move as a major cost-saving initiative, but it’s sent shock waves through institutions that rely heavily on this funding.
Actions Taken
As research universities brace for potential financial impact, the most common action seems to be freezing hiring or requiring additional approvals for bringing in new faculty or staff.
The Massachusetts Institute of Technology, which stands to lose $30 to $35 million annually under the proposed changes, adopted a hiring freeze for nonfaculty employees, WGBH reported. That freeze comes as a recent study showed that MIT is among the nation’s 10 wealthiest universities, with an endowment valued at more than $24.5 billion in fiscal year 2024.
Northwestern University is also making a series of cost-cutting moves, namely freezing hiring and compensation increases. While the university was already reviewing its budget model amid “evolving financial pressures,” leaders announced last week that Northwestern intends to cut nonpersonnel expenses by 10 percent this fiscal year. University officials also expressed concerns about proposed increases to the endowment tax, which is currently 1.4 percent. Northwestern is also one of the nation’s wealthiest universities, with a $14.2 billion endowment.
“While the federal directives coming out of Washington, D.C., are rapidly evolving, in some cases unclear and subject to legal challenges, it is clear that Northwestern and our peer schools could suffer significant financial repercussions,” Northwestern’s president, provost and chief financial officer wrote to the community.
Columbia University, which has a $14.7 billion endowment, is freezing hiring at its medical school as part of “cost containment measures,” according to an email obtained by Gothamist. Officials cited “recent executive orders and other federal actions, including recent NIH guidance to substantially reduce facilities and administrative cost recovery for federally funded programs,” as the impetus for the action and noted Columbia is working to develop new revenue models.
Elsewhere, Vanderbilt University appears to have temporarily paused graduate admissions and quickly reversed the move.
In a video obtained by Inside Higher Ed of a Feb. 4 meeting of Vanderbilt’s Graduate Student Council, recorded before the proposed NIH changes, André Christie-Mizell, graduate school dean, said the university temporarily suspended new offers of admissions. The decision was made “to give the deans time to look at their budgets and to figure out how to move forward,” Christie-Mizell said, adding he expected it to be lifted “in the next few days.”
A university spokesperson said via email Tuesday that Vanderbilt has not paused graduate admissions and “decisions regarding recruitment and admissions are being made at the school level to ensure each school is able to fully support our current students to do their best work, even in conditions where the funding landscape might change.”
Public universities are also feeling the uncertainty.
North Carolina State University announced a hiring freeze last week in a message from executive vice chancellor and provost Warwick Arden, citing the impact of Trump’s executive orders and other guidance, the potential shutdown of the federal government on March 14 and other state financial challenges.
Arden, in a message to senior officials, also stressed the need “to be conservative in the use of all your funds given the challenging financial climate we currently find ourselves in.”
Washington State University has not enacted a hiring freeze. But in an email to the campus community last week, officials noted that option was on the table as the university grapples with the changes at NIH as well as a bleak state budget picture. And in an all-day budget retreat for the state university’s Board of Regents on Monday, the federal funding uncertainty took up more than an hour of discussion, providing perhaps the most in-depth look at how an institution is responding to this moment.
Chris Riley-Tillman, WSU provost and executive vice president, said at the virtual meeting that Washington State could lose up to $25 million a year under the proposed reimbursement rate cap, even as the university has “contractual obligations with individuals based on these agreed promises from the federal government to do work.” He noted that if federal funds go away, Washington State would not stop funding graduate students but would find other revenue sources.
Riley-Tillman also said that such funding losses could force the university “to be really aggressive to decide what we maintain” and force “divesting from some aspects of our research enterprises.” He added that looming decisions “will not be popular across broad groups of stakeholders.”
What’s at Stake
Inside Higher Ed contacted 10 universities that are among the largest recipients of NIH funding to see how they are navigating the uncertainty. Most did not respond to a request for comment.
The University of Michigan, which did not indicate it has taken any cost-cutting measures yet, responded by emphasizing the critical nature of its work and what is at stake financially. Last year, the university conducted just over $800 million in research funded by the NIH, with an indirect cost rate of 56 percent, which helps cover personnel costs, laboratory equipment and more.
Officials highlighted ongoing work on diseases such as cancer, Alzheimer’s and Parkinson’s.
“Reducing that rate to 15 percent will eliminate approximately $181 million in funding and will leave gaping holes in budgets, immediately and needlessly constraining the university’s ability to save lives through medical breakthroughs and drug discoveries, support national security through research in areas like computer science, data science and engineering, and create thousands of jobs in technology areas that are key to the economic strength of the state and the nation,” interim vice president for research and innovation Arthur Lupia wrote to Inside Higher Ed.
Others have framed the fight over indirect cost reimbursement rates as misguided with the potential to undermine scientific research. In a Tuesday webinar, American Council on Education president Ted Mitchell encouraged attendees to maintain pressure on their congressional representatives—some of whom have begun to push back on the NIH—to advocate against the proposed changes, which would affect research efforts.
“Science is at stake here,” Mitchell said.
But as proposed cuts to NIH reimbursement rates and other sweeping changes that affect education remain tangled in the courts, some experts anticipate that budget freezes will only become more commonplace.
