There are thousands of moving parts that make up Northeastern and support its research output. From shiny new buildings to electricity and salaries, the list goes on and on. Combined, it’s terribly expensive. 

One way Northeastern makes up for those costs, specifically the costs that help its research programs, is indirect cost recovery, which covers costs that aren’t tied to a specific grant. It’s a mechanism for the federal government to incentivize universities to perform research. 

Now, a Trump administration policy threatens to slash those funds, leaving higher education institutions waiting anxiously for a final verdict on the matter.

“If universities aren’t able to pay for this, who’s going to do that research? You’re not going to do it. You don’t want to do it at a loss,” said Marc Bucalo, the CEO of Massachusetts consulting company g2 Consultant, Inc., which specializes in indirect cost rate analysis. 

What are direct and indirect costs?  

When an institution gets a federal grant, it often involves funds to cover administrative costs like rent for office spaces, electricity and library access. Those administrative costs are called indirect costs, and the government has been helping institutions pay for them since just after World War II.

The amount an institution receives in indirect costs is calculated using the direct cost of a project. Direct costs are explicitly related to the research project and include items like salaries, equipment, supplies and travel. Indirect costs, on the other hand, go into running the institution that’s hosting the research and are not tied to an individual project. As direct costs are spent, indirect costs go into the university’s operating revenue in order for the university to offset the costs of performing research. 

In February, the Trump administration moved to institute a 15% cap on indirect costs from federal agencies. A rate this low would hobble research operations at Northeastern — and universities nationwide. 

“Northeastern has a robust contingency plan to mitigate impacts to research enterprise, including any potential reductions in federal research funding,” Northeastern’s Vice President for Communications Renata Nyul wrote in an email to The Huntington News. “For example, we are actively advocating for Governor Healey’s DRIVE Initiative, which would use state funds to restore terminated federal research grants in domains that are vital to Northeastern researchers and the Massachusetts economy.”

In fiscal year 2024, Northeastern’s indirect cost rate was 60% for on-campus research, meaning that for every dollar that Northeastern researchers spend on a federally-funded project in direct costs, 60 cents is given to the university to uphold the spaces, technology and other equipment that is required to support research. (Indirect cost rate can still vary between different projects and funding institutions.) 

Although indirect rates vary tremendously among institutions, it is normal for a university like Northeastern, which, as an R-1 institution, is classified as having some of the highest research activity among universities in the country, to have a 40% to 60% indirect rate. 

The rate isn’t arbitrary. It’s set after an annual audit of the university, where federal authorities and university administration meet to decide how much it will cost Northeastern to run its research projects. It’s calculated so that Northeastern does not have to conduct research at a significant deficit, Bucalo said. Without indirect costs, Northeastern would be providing nearly all of the resources needed for research on its own. 

Included in the long list of what is covered by indirect costs are “Our building security, our janitorial services, our electricity, our library, the people in the central administration that help us with submitting grants,” said Erin Cram, the associate dean of the College of Science. Cram added that the amount received through indirect cost recovery still doesn’t entirely cover what it takes for universities to do research. The university did not comment on whether it is able to cover all research costs.

Since Northeastern became an R-1 institution in 2015, it has become increasingly reliant on indirect cost recovery as its research output subsequently increased. The funding it receives from federal grants and contracts has risen significantly. In fiscal year 2024, 3% of the university’s operating revenue came from indirect costs.

A proposed slash to indirect costs nationwide

In February, President Donald Trump announced a 15% cap on indirect costs from federal institutions. This would primarily impact the grants awarded by the National Science Foundation, or NSF, and the National Institutes of Health, or NIH. After a significant number of legal challenges from top universities and states immediately following the decision, the 15% cap on indirect costs was paused by federal courts.

Massachusetts was one of 22 states that sued the Trump administration, arguing that the cap will harm citizens “who are the beneficiaries of research creating treatments, such as modern gene editing, vaccines such as flu vaccines and cures for diseases like cancer, infectious diseases and addiction,” and that “work to cure and treat human disease will grind to a halt.”

The concept is simple: The government gives money to universities to drive forward research that aims to help the public, and the universities carry it out. For Bucalo, this exchange means that the government is paying its “fair share” of research costs. Now, the government wants out.

“[The government is] saying, ‘Universities, you have a lot of money. You should pay for those out of your pocket. We no longer want to pay for them,’ even though there’s been this concept forever, and it’s even in the regulations [that] the government should bear its fair share of those costs,” Bucalo said. “That’s why you do this negotiation, because you’re establishing that.”

In the fiscal year 2024, Northeastern received $67.6 million from the NSF and $88.3 million from the NIH for research. If Trump’s 15% indirect rate had been applied that year, those numbers would have been roughly $37.8 million from NSF and $48.6 million from the NIH, according to an analysis by The News, cutting the funding nearly in half. (These figures include direct and indirect costs.) The university did not provide fiscal year 2025 grant money. 

What will the impact be on Northeastern?

Although the proposed 15% indirect cap has yet to be implemented, the process is creating anxiety across higher education as it waits in the courts. 

“It’s creating a mess,” Bucalo said. “This isn’t just a problem for Northeastern — all the universities are facing this, and it’s taking a lot of time and resources for people to figure this out because it’s big dollars.”

According to a June 5 update to Northeastern’s “Federal Landscape” FAQ page, the university is assuring researchers that they “should continue to pursue their work as planned,” but that a rate cap of 15% would have a “profound effect” on the institution. The university did not specify what exactly may be impacted. 

“You can only absorb so many costs before you have to decide to not do that function anymore,” Bucalo said. 

If the university’s only option is to conduct research that will create a deficit, Bucalo can see the university de-prioritizing research. 

“I think if the university isn’t able to support research, that causes us a lot of problems,” Cram said, adding that the university may seek more donors or look into raising tuition. Northeastern did not respond to a question on whether it would raise tuition if indirect costs were capped.  

Experts also said universities may attempt to transition more items to the direct cost category, though this would be challenging.

Bucalo added that reshuffling funds into the direct cost category may also be significantly less cost-effective. A project might need, for instance, an accountant, so a salary for an individual accountant could be written into the direct cost budget. But one accountant for every one of the hundreds of grants is hard to fathom. Bucalo said putting indirect costs into the direct cost category would be ineffective. 

“[It] doesn’t make sense. Why would you hire an accountant just for one project when you can hire an accountant that can support all the projects?” he said. 

Indirect and direct costs are the engine behind the United States’ success in research, and Cram hopes more people will understand just how important that is. 

“It’s so wonky and nerdy and confusing. [Indirect costs are] not going to resonate with the general public,” Cram said. “We need to stress how science benefits their lives and how training students in science leads to advantages for the United States and for people’s health and well-being.”