Status check, July 2026: NSF funding policy has been unusually unsettled since early 2025, and it is still moving. This page summarizes what has actually happened and been ruled on so far — grant terminations tied to DEI and environmental-justice executive orders, an attempted indirect cost rate cap, and appropriations fights over NSF’s budget — and flags what remains genuinely unresolved. Litigation status can change quickly; treat court-outcome details here as accurate as of publication and re-check primary sources (court dockets, nsf.gov, congress.gov) before relying on them for a compliance decision.
What changed at NSF starting in 2025
Beginning in 2025, the National Science Foundation began terminating active grants it characterized as “not aligned with agency priorities,” a category that in practice concentrated heavily on research tied to diversity, equity, and inclusion (DEI), environmental justice, and, in some cases, misinformation-related topics. This tracked similar terminations at other federal science agencies during the same period, including the National Institutes of Health (NIH) and the National Endowment for the Humanities (NEH). Separately, NSF (along with the Department of Energy) attempted to impose a flat cap on indirect cost (F&A) reimbursement rates, mirroring an NIH policy issued in February 2025. Both threads — grant terminations and the indirect cost cap — produced litigation, but they are legally distinct and have followed different tracks through the courts.
Indirect cost rate cap: blocked, and now also barred by Congress
NIH’s attempt to impose a flat 15% indirect cost rate on grants (NOT-OD-25-068, issued February 2025) was challenged by a coalition of universities and a 22-state group of attorneys general in the U.S. District Court for the District of Massachusetts. A preliminary injunction issued in March 2025 was followed by a permanent nationwide injunction in April 2025; the First Circuit Court of Appeals affirmed unanimously in January 2026, and the administration allowed its Supreme Court petition deadline to lapse in April 2026 without filing — ending that specific litigation with the cap permanently blocked. See CASRAI’s NIH indirect cost policy guide for the full timeline.
NSF’s own attempt at a comparable indirect-cost cap did not survive either, and Congress has since gone further: appropriations report language for the Commerce-Justice-Science bill directs NSF (along with NASA, the Department of Commerce, and the Department of Energy) to continue using indirect cost rates negotiated for fiscal year 2024, and explicitly prohibits those agencies from unilaterally changing negotiated F&A rates. That language also acknowledges the Financial Accountability in Research (FAIR) model — the alternative cost framework proposed jointly by AAU, APLU, AAMC, ACE, COGR, and NACUBO in September 2025 — as worth further consideration, without adopting it outright. For research administrators, the practical upshot is that negotiated F&A rates at NSF are, for now, protected by both litigation outcomes and legislative language, though “for now” is doing real work in that sentence — a future appropriations cycle or a new agency notice could reopen the question.
Grant terminations: two separate court cases, two different postures
Unlike the indirect cost cap, the DEI/environmental-justice-linked grant terminations are being litigated on more than one track, with meaningfully different outcomes so far.
Thakur v. Trump (Ninth Circuit) — reinstatement ordered, narrower scope
In Thakur v. Trump, brought on behalf of University of California faculty whose NSF, NEH, and EPA grants were terminated, a district court issued a preliminary injunction in mid-2025, and the Ninth Circuit Court of Appeals affirmed it in a ruling issued in late May 2026, ordering the three agencies to reinstate roughly $324 million in terminated grants to UC researchers. The Ninth Circuit’s reasoning rests on the First Amendment: it found that selecting grants for termination based on the recipients’ perceived support for DEI or environmental-justice research amounted to unconstitutional viewpoint discrimination rather than a neutral application of programmatic criteria. Two plaintiff classes were provisionally certified — researchers terminated by a generic form letter, and researchers terminated specifically under the DEI-related executive orders. The court also distinguished this injunctive claim from a parallel category of contract-based monetary claims, which it held must proceed separately in the U.S. Court of Federal Claims under recent Supreme Court precedent on federal grant disputes.
Unions and higher education associations v. NSF (D.D.C.) — broader claim, narrower remedy so far
A separate, broader case brought by unions and higher-education associations sought to restore over $1 billion in NSF grants terminated agency-wide, not just at one university system. In September 2025, the U.S. District Court for the District of Columbia (Judge Jia Cobb) declined to issue a preliminary injunction restoring those grants, on two grounds: the plaintiffs had not shown irreparable harm while the case proceeds, and, more consequentially, the court concluded it likely lacked jurisdiction to order retroactive restoration of already-terminated awards. That jurisdictional conclusion traces back to a 2025 Supreme Court ruling on the parallel NIH grant-termination litigation, which held that monetary relief for terminated federal grants belongs in the Court of Federal Claims rather than a district court. Judge Cobb suggested her court likely retains authority over a narrower, forward-looking question — whether NSF’s anti-DEI screening criteria may lawfully apply to future grant decisions — and that claim continues to be litigated. This case remains open; it has not been resolved in either direction on the merits of the broader anti-DEI policy.
The net effect, as of mid-2026: a federal appellate court (Ninth Circuit) has found the termination approach constitutionally suspect and ordered reinstatement for one identifiable group of grantees, while a separate district court case covering NSF’s terminations more broadly remains unresolved and has so far produced no comparable nationwide remedy. These are not contradictory rulings on the same question — they involve different plaintiffs, different procedural postures, and, so far, different courts reaching different specific outcomes on different sub-issues. Institutions with NSF awards terminated under the DEI/environmental-justice criteria should not assume either ruling automatically resolves their own award’s status without checking whether their case falls within a certified class or an applicable circuit.
Budget and appropriations: cuts proposed, partially rejected by Congress
Independent of the litigation, NSF’s overall budget has been under sustained pressure. The administration’s FY2027 budget request proposed steep cuts to NSF, continuing a pattern from its FY2026 request. Congress has not adopted the deepest of those proposed cuts in either cycle: FY2026 appropriations set NSF funding at roughly $8.75 billion, a reduction from FY2025 but far short of the administration’s request, with the core research account held roughly flat and STEM education programs cut by about 20% (compared with a proposed cut in the range of 75% in the original request). FY2027 appropriations were still moving through the House and Senate as of mid-2026, again trending toward smaller cuts than requested rather than full adoption of the administration’s numbers. Separately from the topline dollar figure, NSF’s own award-making pace slowed sharply during this period: reporting has noted NSF making roughly half as many new awards by comparable points in the fiscal year as in FY2025, a gap larger than the topline budget change alone would explain, and consistent with the operational disruption of both the termination actions and general funding uncertainty. See CASRAI’s guide to NSF’s budget and appropriations process for how that annual cycle normally works and why it affects award timing even without litigation in the mix.
What this means for research administrators
- Don’t assume a terminated award is permanently lost, or that it will be restored, without checking case-specific facts. Whether a given termination is covered by the Thakur class, falls under the broader D.D.C. litigation, or sits outside both depends on the specific agency, institution, and termination rationale involved.
- Indirect cost rates at NSF are currently protected by both the litigation outcome on NIH’s comparable cap and explicit appropriations language directing continued use of FY2024-negotiated rates — but this is a current-cycle protection, not a permanent statutory guarantee, and should be re-verified each appropriations cycle.
- Monetary claims and reinstatement claims are being routed to different courts. Since the 2025 Supreme Court ruling on the parallel NIH case, retroactive funding-restoration claims generally belong in the U.S. Court of Federal Claims, while forward-looking policy challenges (e.g., whether an agency may apply a given screening criterion to future awards) can proceed in district court. This matters for how an institution’s counsel frames a challenge to a specific termination.
- Budget uncertainty is a planning risk independent of any single lawsuit. Slower award-making pace and appropriations that remain unresolved well into the fiscal year both affect cash-flow and staffing planning for units that depend heavily on NSF funding, regardless of how the litigation ultimately resolves.
- This is not settled. Both the D.D.C. case and further appellate proceedings following the Ninth Circuit’s ruling remain live. Treat any summary of “current NSF policy,” including this one, as a snapshot that needs re-checking against nsf.gov, court dockets, or institutional research-office guidance before it informs a specific funding or compliance decision.
Frequently asked questions
Has NSF’s indirect cost rate cap been struck down?
NSF’s attempted cap did not survive, tracking the outcome of the parallel and more fully litigated NIH cap (permanently enjoined, with no Supreme Court petition filed before the administration’s deadline lapsed in April 2026). Congress has additionally directed NSF, NASA, Commerce, and DOE to keep using indirect cost rates negotiated for fiscal year 2024 rather than imposing a new flat rate.
Are NSF grants terminated for DEI-related reasons being reinstated?
Some are. The Ninth Circuit ordered reinstatement of roughly $324 million in NSF, NEH, and EPA grants to University of California researchers in Thakur v. Trump (May 2026), on First Amendment viewpoint-discrimination grounds. A separate, broader case covering NSF terminations agency-wide (Unions and higher education associations v. NSF, D.D.C.) has not produced a comparable reinstatement order as of mid-2026 — a district judge there declined to restore over $1 billion in terminated grants, largely on jurisdictional grounds tied to a 2025 Supreme Court ruling routing monetary claims to the Court of Federal Claims.
Where do institutions pursue a monetary claim for a terminated federal grant?
Following the 2025 Supreme Court ruling in the parallel NIH litigation, retroactive monetary relief for a terminated federal grant generally belongs in the U.S. Court of Federal Claims rather than a U.S. district court, which is one reason the NSF-specific district court litigation has been narrower in remedy than the appellate Thakur ruling. Institutional counsel should confirm the current procedural posture before filing, since this is an actively litigated jurisdictional question, not settled doctrine going back further than 2025.
Is NSF’s overall budget being cut?
Yes, but less than the administration has proposed in either the FY2026 or FY2027 budget requests. Congress has rejected the steepest proposed cuts in both cycles while still allowing a real reduction relative to FY2025 funding levels. Separate from the topline number, NSF’s pace of new award-making has slowed substantially during this period.
Related CASRAI resources
- NIH Indirect Cost Policy: Negotiated F&A Rates and the 2025 Cap Dispute
- How NSF’s Budget and Appropriations Process Affects Grant Award Timing
- NSF Grants: An Overview
- National Science Foundation (NSF)
- Indirect Cost Rate (F&A Rate)
- Indirect Cost Rate Agreement (NICRA)
- NSF Research Security: What Notice 149 Requires Proposers to Certify
- What ‘Broader Impacts’ Means Under the New NSF Policy
