The National Institutes of Health (NIH) on Friday made a significant reduction in grants reserved for research institutions, a decision that may significantly impact American higher education.

The NIH said it provided over $35 billion in grants to more than 2,500 institutions in 2023, announcing that it will now limit the amount granted for “indirect funding” to 15 percent. This funding helps cover universities’ overhead and administrative expenses and previously averaged nearly 30 percent, with some universities charging over 60 percent.

The change will take effect on Monday, and will save roughly $4 billion annually, per the NIH.

A directive issued from the department argued that its funds should go toward direct scientific research rather than administrative overhead.

“The United States should have the best medical research in the world. It is accordingly vital to ensure that as many funds as possible go towards direct scientific research costs rather than administrative overhead,” it stated.

Reacting to the development, the Association of Public and Land-Grant Universities said this decision would limit medical breakthroughs that cure cancer.

The organization’s president, Mark Becker, said in a statement, “NIH slashing the reimbursement of research costs will slow and limit medical breakthroughs that cure cancer and address chronic diseases such as diabetes and heart disease.”

“Let there be no mistake: this is a direct and massive cut to lifesaving medical research,” the statement added.

Becker called on the Trump administration to reconsider the action, calling it “self-defeating.”

During its first week in January, the administration abruptly decided to freeze the grant review process at the NIH.

The decision led to cancellation of meetings including study sections, which review the applications for NIH fellowships and grants. Advisory council meetings, which determine if an application should receive a recommendation for funding from an NIH institute or center, were also cancelled.  

“I don’t know that there’s a precedent to this, certainly not on the scale,” Esther Choo, a professor of emergency medicine at Oregon Health and Science University, whose NIH study section was canceled, said at the time.