Trump Plans to Shake Up Higher Education

Capping ‘indirect funds’ for researchers at 15% is a good start at curtailing the administrative bloat.

By Jason L. Riley. Excerpts:

"According to NIH, $9 billion of the $35 billion that it granted for research last year “was used for administrative overhead, what is known as ‘indirect costs.’ ” A school that receives a grant typically gets an additional 50% of its modified total direct costs (which includes salaries, materials and supplies, services, travel and some subcontract payments) to cover these administrative expenses. At prestige schools such as Harvard, the overhead payments—for the use of buildings, electricity, support staff, etc.—can run as high as 70%. The Trump administration wants to cap this figure at 15%, which it estimates will save taxpayers more than $4 billion annually.

The labor economist Richard Vedder thinks this is exactly the shock to the system that higher education needs. “Of course the universities with heavy research grants are going crazy over this,” he told me. “But if you talk to anyone at a university, you know that those overhead costs are vastly inflated compared with the true marginal cost, or extra cost, to the university doing the research.” He added that many schools collect so much overhead money that they give some of it back to researchers as an incentive to apply for more research grants. “It’s kind of a con game, all based on false assumptions and faulty economics,” Mr. Vedder says. A nonnegotiable uniform rate would be far more efficient."

"Mr. Vedder argues that one of the biggest problems with higher ed today is that colleges aren’t sufficiently disciplined by market forces."

"By his calculations, the productivity of university employees over the past 50 years has declined not only in comparison with the average U.S. worker but also in absolute terms. It took more faculty and staff to educate a college student in 2021 than it did in 1972."

"Far more people attend college today than stand to benefit from the experience, judging from the roughly 40% who don’t graduate and the fact that so many people who do get a degree wind up in jobs that don’t require one."

"the percentage of graduates who come from the bottom 25% of the income distribution is similar to what it was in 1970."