Article
Transforming research universities for the 21st century: Adapting to a new federal compact
June 30, 2025 · Authored by Daniel Greenstein
Academic research will continue powerfully into the 21st century, driving innovation, economic growth and solutions to humanity's greatest challenges. But make no mistake—the operating and business models that have sustained research universities for the past half-century must transform dramatically to achieve this objective. The question is not whether research will thrive, but how universities will adapt their structures, partnerships and approaches to ensure it does.
The catalyst: A changing federal compact
The immediate catalyst for this transformation lies in the federal budget expected to pass in the coming weeks. After more than 50 years of robust partnership between the federal government and research universities, we're witnessing a fundamental shift in this compact that will reshape the research enterprise in profound ways.
The changes are threefold and significant. First, major research funding agencies—the National Institutes of Health (NIH) and the National Science Foundation (NSF)—face substantial budget cuts, reducing the overall pool of available research funding. Second, and perhaps more disruptive, federal reimbursement rates for research grants are expected to plummet to as low as 15 percent. These overhead rates, which universities negotiate individually and which currently range up to 60 percent or more at some institutions, provide crucial "disposable" funding that supports activities across the entire university enterprise. Third, potential reductions in international student visas threaten to diminish the graduate student population that forms the backbone of university research—international students comprise roughly 25 percent of all graduate students.
The immediate impacts are predictable. Universities will follow the money, shifting research focus toward areas where funding remains available. If NIH and NSF funding contracts while Department of Defense research funding remains stable, we'll see research portfolios realign accordingly. The subject areas and lines of inquiry that define university research will increasingly reflect funding availability rather than purely intellectual curiosity or societal need.
