“NIH indirect cost policy” is not one rule. It is a layered set of carve-outs on top of the government-wide indirect cost (Facilities & Administrative, or F&A) rules in 2 CFR Part 200 (the Uniform Guidance) — plus, as of February 2025, a still-contested attempt to replace individually negotiated rates with a single flat cap. This guide covers the standing policy (how NIH’s negotiated-rate mechanics differ from the 2 CFR 200 baseline, mechanism by mechanism) and then summarizes the current cap dispute, with a link to CASRAI’s dedicated deep-dive on that litigation.
The 2 CFR 200 baseline, briefly
Under 2 CFR Part 200 (the OMB Uniform Guidance), a research institution’s indirect cost rate is set through a Negotiated Indirect Cost Rate Agreement (NICRA) with its cognizant federal agency — for most institutions of higher education this is the Department of Health and Human Services’ Division of Cost Allocation, since HHS (via NIH) is typically an institution’s largest source of federal research funding; a smaller number of institutions are cognizant to the Department of Defense’s Office of Naval Research instead. The rate-setting mechanics, including the institution’s DS-2 Disclosure Statement describing its cost-accounting practices, are set out in 2 CFR 200 Appendix III specifically for institutions of higher education. Once negotiated, a rate applies government-wide: every federal agency funding that institution is expected to honor the same negotiated rate on new awards, unless a specific statutory or agency exception applies (see below). This baseline is described in more general terms in CASRAI’s indirect cost recovery entry and Direct Cost vs. Indirect Cost comparison; this page picks up specifically where NIH’s own policy diverges from that general framework.
Where NIH’s standing policy already departs from the 2 CFR 200 default
Even before the 2025 cap proposal, NIH already applied several award-mechanism-specific exceptions to the “honor the negotiated rate” default — these are not new, and they are not part of the disputed 2025 policy:
- Research project grants (R01, R21, U01, and similar mechanisms): the institution’s full negotiated F&A rate applies to the modified total direct cost (MTDC) base, per the standard 2 CFR 200 Appendix III mechanics and the NIH Grants Policy Statement.
- Institutional research training grants (T32 and related NRSA training mechanisms): NIH reimburses indirect costs at a flat 8% of MTDC — not the institution’s negotiated rate — excluding tuition and fees, subaward costs above $25,000, and equipment from that base. This is a long-standing, statutorily-rooted feature of the NRSA training-grant mechanism itself, unrelated to the 2025 dispute. (Source: NIH Grants Policy Statement §11.3.8.)
- Individual NRSA fellowships (F31, F32, and related F-series awards): F&A costs are not reimbursed at all. Institutions instead receive a separate, capped institutional allowance intended to cover fellow-related administrative and training costs — a different budget line, not a rate applied to direct costs. (Source: NIH Grants Policy Statement §11.2.9.)
- Foreign organizations and foreign components of domestic awards: NIH applies a fixed 8% MTDC F&A rate rather than requiring (or generally permitting) a negotiated foreign rate, per NIH Grants Policy Statement §7.4.
- Organizations with no negotiated rate at all: the 2 CFR 200.414(f) de minimis rate — currently 10% of MTDC — is available government-wide, including at NIH, to any non-federal entity that has never negotiated its own rate. See CASRAI’s de minimis rate (NIH) entry for how NIH applies this specific provision.
- SBIR/STTR awards: indirect cost treatment for small-business grantees follows a distinct set of mechanics from the academic NICRA process. See CASRAI’s guide to indirect cost rate mechanics for SBIR government contractors.
The throughline: NIH has never treated “the negotiated rate” as a single uniform number across every award type it makes. Research administrators budgeting an NIH application need to know which mechanism they’re applying to before assuming the institution’s headline negotiated rate applies.
The 2025-2026 proposed flat 15% cap: current status
In February 2025, NIH issued Notice NOT-OD-25-068, proposing to replace each institution’s individually negotiated F&A rate with a single flat 15% rate on grants to institutions of higher education — a far larger, government-wide-in-effect departure from the 2 CFR 200 negotiated-rate framework than any of the standing mechanism-specific carve-outs above. The policy was immediately challenged in court by higher-education associations, a coalition of state attorneys general, and the AAMC; a nationwide injunction followed within weeks, and the U.S. Court of Appeals for the First Circuit affirmed that injunction in early January 2026, holding that the change violated appropriations-law protections for negotiated indirect-cost rates and NIH’s own rate-change procedures. As of this writing the 15% cap is not in effect, though the administration has signaled continued interest in pursuing a similar policy goal through the FY2027 budget process, and a research-community-developed alternative (the FAIR model, published by a coalition including AAU, APLU, AAMC, and COGR) has been proposed as a possible replacement framework. For the full rationale, litigation timeline, and what a flat cap would mean operationally if a lawful version is ever implemented, see CASRAI’s dedicated guide: NIH’s Proposed 15% Indirect Cost Cap: What It Means for Research Institutions.
Why the comparison to 2 CFR 200 matters
A recurring point in the 2025 dispute — and a useful lens for understanding NIH indirect cost policy generally — is that 2 CFR Part 200 does more than set a rate-negotiation procedure; it also defines which costs an institution is required to recover only through the indirect rate versus which costs may be charged directly to an award. A flat percentage cap compared against a foundation’s flat indirect-cost cap is not an apples-to-apples comparison unless the underlying direct/indirect cost-allocation base is also the same, and under 2 CFR 200 that base is considerably more constrained for federal awards than it typically is for private philanthropic grants. This is the core structural argument research-administration bodies raised against comparing the proposed 15% NIH rate to caps used by private funders. See CASRAI’s Direct Cost vs. Indirect Cost comparison for the underlying 2 CFR 200 cost-classification rules this argument rests on.
What research administrators should track
- Confirm which NIH mechanism an application falls under before assuming the institution’s headline negotiated rate applies — training grants, fellowships, and foreign components each follow a different rule than a standard research project grant.
- Keep the institution’s NICRA and DS-2 current with its cognizant agency; a lapsed negotiation defaults an institution to the 10% de minimis rate, not to its most recent negotiated figure.
- Monitor the FY2027 federal budget process and any new NIH guidance for renewed attempts at a flat-rate policy — the underlying policy goal behind the 2025 notice has not been abandoned even though the specific 2025 mechanism was enjoined.
- Distinguish, in internal budget guidance to PIs, between the standing mechanism-specific carve-outs above (settled, long-standing policy) and the 2025-2026 cap dispute (currently blocked, still evolving) — conflating the two produces incorrect budget assumptions in either direction.
Frequently asked questions
Does NIH use the same indirect cost rate as other federal agencies?
For research project grants, yes in principle — a NICRA negotiated with an institution’s cognizant agency is meant to apply government-wide. In practice, NIH applies several of its own mechanism-specific exceptions (training grants, fellowships, foreign components) that other agencies may handle differently; always check the specific funding agency’s current policy rather than assuming uniformity.
Is the NIH 15% indirect cost cap in effect right now?
No. It was enjoined by a federal court in 2025 and that injunction was affirmed on appeal in early 2026. See CASRAI’s dedicated guide to the cap for the full timeline and current status.
Why do NIH training grants get a flat 8% rate instead of the institution’s negotiated rate?
This is a long-standing feature of the NRSA training-grant mechanism itself (T32 and related awards), not part of the 2025 dispute — it predates that controversy by decades and is unrelated to it.
What happens if an institution has no negotiated rate at all?
It can use the 2 CFR 200.414(f) de minimis rate, currently 10% of modified total direct costs, without having to complete a full rate negotiation.
