Cutting Indirect Costs for Universities Impacts More Than Research

Image above: University of Michigan campus. Photo credit: w_lemay, CC BY-SA 2.0 https://creativecommons.org/licenses/by-sa/2.0, via Wikimedia Commons

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For our latest column, managing editor of the Observer, Hannah O. Brown, spoke with incoming APS President Pamela Davis-Kean. Davis-Kean is a professor of psychology at the University of Michigan (UM) who has been continually funded by the National Science Foundation (NSF) and the National Institutes of Health (NIH). For a decade, she directed an NSF grant to support the Center for the Analysis of Pathways from Childhood to Adulthood, an integrative development-science center focused on replication across longitudinal studies in multiple countries. 

Brown and Davis-Kean spoke on December 17, 2025. Edited excerpts of their conversation follow. 

In 2025, Davis-Kean traveled to Washington, DC, to talk with policymakers about issues related to reducing indirect costs. This advocacy work came after the Trump administration declared a 15% cap on indirect costs for universities in an effort to reduce money spent on research-related administrative costs. At UM, the current indirect cost rate is 56%. A cap at 15% would have drastic consequences, beyond just research impact, she argues.  

In this Q&A, Davis-Kean describes the role indirect costs play in the university research landscape, as well as the important role of universities in their local economies, and she outlines what is at stake if those indirect costs are cut—not just innovations from research, but many American jobs.  

For readers who may not be familiar with the issue, can you describe the role indirect costs play in supporting universities and research infrastructure?   

Universities’ primary missions are teaching and research, and most of the infrastructure is designed to address these missions. When we partner with the government to do research on topics important to the citizens of the United States, we often need additional space for labs, equipment, administration, etc., that exceed what can be paid for through the infrastructure of the university or college. Some of this is paid for by the direct costs of the grant to run the specific project, but other costs—for example, grant administrators that create budgets, human subject committees, compliance offices, and other shared activities for managing proposals and funded grants—are handled through indirect costs, or the cost associated with the infrastructure to manage grants and shared work across grants. These indirect costs are not for the basic buildings or utility expenses, but for individuals who help manage the requirements and shared activities of a grant.

Can you describe some of the advocacy work you have been involved in on this issue? 

Universities, because of their size and because of what we do, are often one of the top employers in their respective states. The University of Michigan, where I’m at, is one of the largest employers in the state of Michigan. The University of Alabama, Birmingham is the number one employer in Alabama. In most states, the large universities are generally in the top five employers, often the number one employer in the state. 

Universities employ people across the entire education spectrum, especially those that have hospitals associated with them. Due to the breadth of jobs that are needed to keep universities going, you will see jobs available for high school graduates all the way up to the PhDs that are in the classrooms teaching and doing the research. 

Because the infrastructure needed for sustaining research often involves individuals who work across multiple grants (e.g., administrators, compliance officers), they are paid through the facilities and administration funds (indirect costs). The conversations around indirect costs sometimes note that the government shouldn’t be paying for the buildings and the lights at universities. That’s a very small portion of what universities pay. They pay that anyway because they have people in those buildings.  

What indirect costs do pay for are the people who, for efficiency’s sake, do multiple tasks related to managing grants or managing multiple tasks on multiple grants. The grant administrators handle what we call pre-award and post-award for multiple grants. They’re an indirect cost because they are shared across multiple groups of people—not one principal investigator but multiple principal investigators. Compliance officers go across every grant that we have at a university.  

In February of 2025, when it was suggested late on a Friday evening that indirect cost rates should be reduced across the board for all federal grants, the people who were in these infrastructure positions would all have lost their jobs. Every university, both public and private, would have been reducing their staff and having to remove large numbers of people from these jobs, because that’s what the infrastructure of universities are, in general: the people.  

The economic impact for each state was going to be enormous. It was probably going to send every state into a recession, if not a depression, because once those people lost their jobs, they also lost their benefits. And there would be no other jobs for them to go to, because all universities and colleges would be facing the same dilemma at the same time. They would have applied for other jobs at universities, and those jobs would not be available for them to be hired anywhere. This would have been a massive problem in the United States.

So when you went to the Hill, it sounds like some of the representatives you spoke with were aware of implications for research, but not really the economic implications. 

Right. I think everybody was like, “Can’t you just direct cost that?” Right now, there are rules that don’t allow things like grant administrators to be on direct cost. They are considered infrastructure, and they have to be paid for from indirect cost. So even by the federal requirements, it’s an infrastructure cost and not a direct cost to the grant. I think the representatives didn’t understand the extent to which people are employed on indirect cost or what the extent of research infrastructure actually is. 

And instead, I think they thought, “Oh, we’re just making universities pay for their buildings and their electricity.” And, once again, we would have paid for that anyway. What we’re doing is paying for the things that we’re required to do for the federal government, which is compliance and grant preparation. That allows us to say we can receive money from the federal government, and we know how to distribute it, and we do it all correctly. Those are the kinds of things that we have indirect costs taking care of, and I just don’t think that was understood. It was more of this very cartoonish belief—which somebody in the federal government told me—that we sit in our leather chairs and smoke our pipes and don’t do anything at universities when we’re receiving that money. And that just isn’t the case. It’s not that way.

Is it your sense that other professors and university staffers are not necessarily aware of the economic consequences of this? 

 I don’t think people are. Because I manage a large survey research center, I understand deeply the direct and indirect costs and how indirect cost is a person just like direct cost is a person. It’s not a bill that I pay. It’s actually people who I’m also paying. Most of the time, the scientist is the person who is the face of the research and that is a direct cost, but they don’t think about the grant manager who had to put together the pieces of the grant proposal, or the people who checked that proposal with compliance with federal guidelines and rules, or the person who had to distribute the money into their budget so they could actually charge the budget. These are the people who are also employed to keep science working and to meet the ethics and rigor that we want to see in the science.

Can you talk about what universities can do? Is it educating like you’ve been doing on the Hill, or are there moves university leadership can take? 

 I think of what you just asked me, “Are people aware of this?”, and I think making them aware of the complexity of what it means to take federal funding or to do research—that’s above the expectation for a faculty member. Money from grants is to help pay for faculty who by and large only have nine-month appointments to do research throughout the year. Being able to partner with funders to produce science more quickly for the public interest by having more nodes of research across the United States is important for our standing as leaders in science and technology. This distribution of science gets the best scientists in the country to help find solutions for the population. So, distributing the money out to research universities and institutions helps get science done much more quickly.  

This model—that was created ages ago—actually ends up being incredibly successful for moving scientific innovation forward by distributing it out and making sure people are doing top-quality research and benefiting the United States, which is why we come up with most of the big medical advancements. Engineering advancements are still coming out of the United States. Many people think about it being elsewhere, but it’s still the United States where most of the major innovation happens. That’s because of the partnership we’ve had with the federal government to have our best and brightest working on problems for the people of the United States.  

Those are the kind of things we could talk more about. What is the value? What is the value of making sure that whenever money is received, it’s utilized in a way that it’s supposed to be utilized?

What roles can psychological scientists play concerning this issue? And what can they do to advocate for it? 

I think being knowledgeable about this is crucial. When this executive order came out, the question was, is this the end of research? It would no longer be supported, and if it can’t be supported by federal grants, the universities themselves are not in a position to support research at that level.  

The research that we have that is innovative, and which we are at the top of, would end almost immediately. All the interventions we’re working on—for depression, attention-deficit/hyperactivity disorder, autism—all the research we’re doing would come to an end, and we would no longer be the leaders in those areas. 

I’m hoping people realize that they’ve become dependent upon these innovations in healthcare and mental health in the United States. All of that would come to a screeching halt. We wouldn’t be able to understand the brain. We wouldn’t be able to understand what happens to the brain under depression, with schizophrenia, with any of the topics that we care about. 

I don’t think people really understand what that would look like, and I don’t think they want to experience it. All the scientists here would continue to do research. They would just go to other countries that are desperate to hire researchers trained in the United States. Canada just opened up another opportunity to hire non-Canadian scientists to come to Canada as they continue to try to pick up researchers who are feeling threatened by the funding situation. We would like them, I think, to do their research in the United States so that the people of the United States can benefit from it. Otherwise, all of those innovations go elsewhere, and we wait for other countries to patent them before we have access.  

The COVID vaccine is a great example of what happens when the federal government puts money into innovation. We were able to get vaccines relatively quickly: That’s how good we are when the federal government and researchers—and in this case also industry—pull together to get things out the door to help the American people as fast as possible. We would lose the ability to do all of that.   

Ready to take action? Visit APS’s Act Now page to learn more about how to speak with your U.S. Representatives and Senators. 

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