Dear Colleagues,
The National Science Foundation (NSF) will apply a standard 15% indirect cost rate to all new university grants, according to a May 2 policy memo. The 15% rate applies only to new awards made to institutions of higher education on or after May 5. The policy does not apply retroactively to existing awards. Universities will not be required to amend budgets for awards issued before this effective date, nor will they be required to return previously reimbursed indirect costs. The new rate would result in a significant decrease in the amount that U-M would receive from the federal government to conduct vital research, as U-M’s current negotiated rate with the federal government is 56%.
The announcement coincides with the release of the president’s fiscal year 2026 discretionary budget request, which asks Congress to reduce non-defense spending by 23% over fiscal year 2025 levels. While the request includes reductions at many agencies that fund research sponsored across the University of Michigan, it is important to note that Congress is not obligated to fund the government at the levels set forth in the request, and often does not.
Federally funded research is vital to the nation. It saves lives. It creates jobs. It strengthens national security and ensures American leadership in critical areas of science and technology. A decrease in indirect cost payments, which help pay for the essential facilities and administration that federally funded research requires, limits our ability to produce the technologies, cures and solutions on which so many Americans rely.
Our university leaders are working to determine the implications of these actions to our research enterprise and will provide additional details on any necessary implementation actions as soon as possible. I encourage you to continue visiting the OVPR website for updates on this topic and other agency directives. You can also visit the Public Affairs website for broader information on federal actions.
Thank you for your work and your dedication to our vital mission.
Sincerely,
Skip
Arthur Lupia
Vice President for Research and Innovation (interim)
Gerald R. Ford Distinguished University Professor