A coalition of leading American universities, including Brown University, MIT, Cornell, the University of Michigan, and Michigan State University, is filing a lawsuit against the U.S. Department of Energy in response to newly imposed cuts on federal research grant funding. The lawsuit, filed in federal court this week, aims to block a recent policy change that dramatically limits the reimbursement of “indirect costs” associated with scientific research to just 15% of total grant awards.
The universities, along with major education advocacy groups such as the American Council on Education, argue that the Energy Department’s new rule threatens to upend decades of precedent in federal research funding. They contend that the changes will destabilize university-led research initiatives across the country by failing to account for the true overhead expenses of running scientific laboratories, maintaining facilities, complying with federal regulations, and supporting administrative infrastructure.
Indirect costs, also known as Facilities and Administrative (F&A) costs, have historically been reimbursed at higher negotiated rates—often ranging between 40% and 60%—depending on the institution. These funds are vital to sustaining the infrastructure that supports groundbreaking research in energy, climate science, national security, and technological innovation. The Department of Energy’s new cap would slash those reimbursements to a flat 15%, a move the plaintiffs claim was implemented without adequate consultation or adherence to administrative procedure.
University officials and legal advocates say the abrupt shift could force institutions to subsidize large portions of research projects out of their own operating budgets or scale back their participation in federal research entirely. Brown University President Christina Paxson calls the policy change “short-sighted and harmful,” warning it “risks weakening the scientific ecosystem that has made the United States a global leader in innovation.”
The lawsuit also asserts that the DOE’s rule violates federal guidelines established under the Office of Management and Budget’s Uniform Guidance, which allows universities and federal agencies to negotiate fair indirect cost rates based on their actual operating expenses. By unilaterally imposing a fixed ceiling, plaintiffs argue, the department is undermining legally protected contractual arrangements and jeopardizing hundreds of ongoing research projects.
The Department of Energy defends the policy as a cost-containment measure intended to ensure that more funding flows directly to scientific experimentation and development, rather than institutional overhead. In a statement, the DOE says the change is designed to increase efficiency and transparency in federal grant spending, emphasizing that the department continues to support vital research across a broad range of institutions.
However, critics counter that cutting indirect costs without increasing overall grant amounts simply shifts the financial burden to universities, many of which are already managing tight budgets due to declining enrollment and state support. They also warn that the policy disproportionately affects public research universities and institutions with less capacity to absorb overhead shortfalls.
The American Council on Education, which represents more than 1,700 institutions of higher learning, says the DOE’s decision could have a chilling effect on academic research at a time when global competition in energy innovation is intensifying. “This is not about bureaucracy,” said ACE President Ted Mitchell. “This is about making sure the lights stay on in the labs where life-changing discoveries are made.”
The outcome of the lawsuit could set an important precedent for how federal agencies structure research grants in the future. The case is expected to draw significant attention from lawmakers, especially those on Congressional committees overseeing science, energy, and higher education policy.
