How Bad Is It When the Government Cancels Active Research Grants?

Are we headed for a chaotic new normal?

Football games aren’t the only thing that Michigan State loses. MSU, where I did my PhD, lost $104 million in terminated grants in 2025. In Fall 2025, MSU announced a 9% budget cut and launched a fund to support faculty and students who had lost research funding. Photo of Spartan Stadium. Source: Flickr (Corey Seeman).

Shortly after returning to office in 2025, the Trump administration began terminating thousands of ongoing grants to US universities, totaling billions of dollars in cuts. Terminating in-progress research grants is unusual — no previous administration has canceled grants at this scale¹. Predictably, universities and scientific associations raised objections, taking issue with the volume of cuts, their unpredictability, and their targeting of specific topic areas (climate change, DEI, etc.).

These cuts are unique in their abruptness. It’s normal for priorities to change between administrations, increasing money for some areas and decreasing it for others. But because in-progress grants are rarely canceled, the research community can typically adapt and re-orient their efforts toward these new priorities. This time, universities were caught by surprise, and rather than adapt to changing priorities, they had to take drastic measures to protect their financial health and rescue PhD students and research projects that lost funding.

Abrupt grant terminations have the potential to harm research quality if the cuts are driven by political considerations. Large scale and unpredictable cuts could degrade our scientific infrastructure and talent pipeline. These risks have left me with two questions: What happens if termination of in-progress grants becomes a norm across administrations? Are in-progress grant terminations a threat to the structure of science in the US?

I would argue that we should be concerned about the potential for damage to the research system, but I’m not convinced that mid-stream terminations will become the norm. Optimistically (maybe delusionally), this might be an opportunity to develop a more resilient science funding system, or for Congress to create guardrails to protect ongoing projects.

The effects of mid-stream terminations

When a research grant is terminated unexpectedly, work stops or is interrupted. If a grantee receives a termination notice from their funding agency, they must stop using government funding to conduct research. They can search for alternative sources of funding, but in some cases, such as clinical trials, research cannot be paused while additional money is identified. In other cases, researchers will be unable to find money to restart their projects.

Grant terminations might lead to three consequences: a reduction in the volume and quality of research, a reduction in human capital, and weakened university financial health.

Social cost of less, and lower quality research

The most fundamental cost of midstream terminations is that society doesn’t benefit from the research. Research generates high social return on investment (SROI) through improvements to human wellbeing and health and economic growth. With basic research in particular, it’s unlikely that an incoming presidential administration will readily understand the quality of a given grant they terminate. While any grant might sound silly to a newly hired political appointee, some silly sounding research (on gila monster spit, bacteria in geysers, or the aerodynamic characteristics of bird beaks) can lead to major breakthroughs². Moreover, while unspent federal funding returns to the US Treasury, some of the primary uses of funds returned to the Treasury, like servicing the national debt, likely have a lower SROI than R&D.

In addition to reducing the volume of research, abrupt terminations can reduce research quality by rewarding caution. If scientists perceive specific types of research as being more likely to be canceled, a decline in high-risk science might follow. If, for example, a scientist is conducting clean energy research and that research is terminated due to the topic, it may reduce the likelihood that scientists will pursue similar clean energy research and other types of energy research that might be controversial to either political party.

Reduction in human capital

Terminated grants can lead to layoffs of non-tenured faculty, administrative staff, postdocs, and PhDs. Of these, I’m most concerned about how grant terminations might affect the pipeline of PhD students. Some PhD students who are funded by terminated grants may not complete their work, though universities will likely work hard to fund them. Students may even hesitate to start grant-funded PhDs if they fear the grant will be terminated before they finish. A PhD is usually a 5-7 year commitment, and there are limited benefits to partial completion. Even a small risk of losing funding and having to drop out might discourage applicants. And if PhD advisors think they will have to hustle to find funding if a grant falls through, they’ll be more cautious about taking on new students.

Don’t we have enough PhDs, though? For decades, academics and policymakers have been concerned that we have a glut of PhDs, but I don’t think there’s good evidence that we have too many STEM PhDs. The NSF Survey of Earned Doctorates shows that the percentage of STEM doctorates who graduate without a professional commitment post-degree is the lowest it has been in over 20 years. This is despite the number of STEM PhDs produced annually rising by about 65% during that period. PhD-holders also make more money than people with bachelors or masters degrees. In addition, while it’s possible that there are too many low quality PhDs, that’s not who is being affected by grant terminations. When the Trump administration froze $2.2 billion in grants to Harvard University, it’s likely the STEM PhD students affected were pretty talented.

Weakened university financial health

Widespread grant terminations can harm university financial health. Universities have high fixed costs (infrastructure, buildings, equipment) and commitments to tenured faculty. In response to funding uncertainty, a potential reduction in overhead, and reductions in foreign students, universities have conducted layoffs and hiring freezes. During past financial crunches, universities have cut services provided to students and raised tuition. However, it’s also true that there are low performing and redundant centers and staff that budget cuts can give administrators permission to remove. Harm to university finances depends on the scale of grant terminations, and whether they are coupled with other shocks (e.g. reductions in overall science funding, caps to indirect costs, declines in recruitment of international students).

Some of these harms mirror the consequences of federal science budget cuts; others are specific to mid-grant terminations. Effects on the volume of research produced and university financial health are probably similar for budget cuts and mid-grant terminations. In terms of the academic pipeline, my guess is that, while cuts to science budgets would mechanically reduce the number of PhD students, unexpected terminations are more damaging because they introduce the risk of students losing their funding after they have begun their programs. The potential for a reduction in controversial or high risk research is the most unique. While an administration or Congress can shift funding priorities and slowly increase or decrease funding for research areas, scientists may try to avoid future terminations by conducting cautious research.

Are mid-stream terminations the new norm?

The harm caused by mid-grant terminations is driven by the scale of terminations and whether these terminations become a norm. In a very hand-wavy sense, the likelihood of mid-grant terminations continuing is driven by decisions by the two political parties, either to escalate or de-escalate. What matters is whether the two parties engage in it-for-tat retaliation, so it’s important to look beyond the current administration and consider how switches in the political party in power might influence decisions.

The table below suggests how changes in the administration party post-Trump administration might impact grant terminations. In two of the three scenarios, mid-grant terminations become a norm, but I’m not sure which is the most likely scenario.

One area of uncertainty is the extent to which the Trump administration will fund research that Democrats do not like. There is obviously research that Democrats want to fund that Republicans dislike (e.g., climate change science or DEI-related research). It is unclear, however, if the converse is true. One could imagine the Trump administration funding research connecting vaccines to autism or another controversial issue that a Democratic administration would want to cancel, but that has not happened yet. The research priorities outlined in the President’s Fiscal Year 2027 R&D Priorities are fairly uncontroversial, perhaps with the exception of a proposed Golden Dome missile defense program. Similarly, the Department of Energy Genesis Mission announcement has enjoyed a largely positive reception.

How can we build resilience in the science funding ecosystem?

What can entities with a stake in the health of the American science enterprise do to build resilience against politicized, mid-grant terminations? I’m not confident about how well these ideas would work, but wanted to share some proposals for what universities, philanthropy, states, and Congress could do.

What universities can do: Universities can create pools of “insurance” that rescue PhD students and projects. Some universities (like Michigan State University and UMass Amherst) announced programs to rescue at-risk research projects and graduate student funding in response to terminations in 2025. While not advertised as insurance, that’s essentially what this is: the university has a common fund that affected researchers can tap into. A downside is that this may become unpopular due to moral hazard; if the university is using its own money, non-risky research subsidizes scientists who conduct risky research. Another downside is that it will be difficult for many universities to make up for the scale of grant cuts. In the case of Michigan State University’s rescue fund, the volume of available funding ($5 million this year) is a small fraction of the $104 million in federal funding they lost.

What philanthropy can do: Philanthropies can create pools for at-risk research or PhDs. There have already been some foundations that have done this, for terminated USAID grants, Corporation for Public Broadcasting grants, NSF grants, and biomedical research grants.

Beyond this, philanthropists could expand their science giving. As of 2022, private philanthropy was funding around $16.7 billion toward research. By comparison, just the NIH spends nearly $48 billion on research each year; federal R&D expenditures are around $141 billion. While the private sector has greatly expanded its R&D expenditures, spending $580 billion on R&D, firms tend not to fund basic research — they’re appropriately focused on R&D that supports their bottom line.

Philanthropists have the flexibility to fund research that supports social good, with no expectation of profits. Some funders, like the Chan Zuckerberg Initiative, are moving more assertively into research (increasing their basic research giving to $10 billion), leveraging new advances in AI. But foundations and high net worth individuals can and should do more. As Ari Simon and Aaron Seybert suggested earlier this year, philanthropists should expand their science funding, with a particular focus on protecting scientific infrastructure and personnel - through stopgap funding for research projects, support for the PhD pipeline, and preservation and curation of important datasets.

What states can do: One option in response to federal research cuts (both budget cuts and in-progress grant terminations) is for states to expand their research funding, as the state of California has considered. Federal science funding is more efficient, however, due to economies of scale. The federal bureaucracy may be slow, but having 50 different science funders would be inefficient and lead to redundancy. However, states already do fund some research and could expand funding in areas that have experienced research cuts and are important to those states (e.g. wildfire research in California).

What Congress can do: Generally, Congress can try to make grant termination more difficult or painful for the government or make terminations matter less to the research ecosystem. I’m not especially confident in the feasibility of my ideas to make termination difficult, but am sharing them because I think they’re directionally useful:

1. Include appropriations language limiting termination authority: In trying to reduce the odds that the government will terminate in-progress grants, Congress could include appropriations language prohibiting the Office of Management and Budget and science funding agencies from issuing “termination for convenience” notices on Congressionally authorized and appropriated research grants. “Termination for convenience” allows the government to end a grant when it is no longer needed, without the government needing to provide a reason. An administration might find other ways to terminate those grants, but such appropriations instructions would help on the margin.

2. Require automatic payouts for terminations: A more novel approach would be for Congress to require an automatic payout if research grants are canceled (e.g., some percent of remaining grant funds are paid out in cash). This would go beyond the existing requirement for the government to cover closeout costs and would provide unrestricted funds to ease the pain of cancellation on the grantee and add a bit of pain for the grantor.

3. Make research grants more like contracts: Congress could specify that the government must come to settlement agreements when they terminate certain research grants, as is currently done for contracts, but not grants. If the government routed more research funding through Other Transactions³, which recent jurisprudence suggests may be legally closer to contracts than grants, that may allow researchers to recoup more funding if their awards were terminated.

To create resilience in the science ecosystem, Congress can diversify the federal research portfolio. If part of the Administration’s motivation for terminating university grants is a belief that universities have broken the social contract (or are just too woke), this would allow administrations to fund in other, innovative ways. Elsewhere, IFP has proposed X-labs as a way to expand and diversify the federal science portfolio. Recently, the NSF announced a similar initiative called Tech Labs that will fund non-university research institutions. While funding research non profits would not reduce the harm to universities, it would create more resilience in the system and allow for political parties to ratchet up or down research funding to their preferred type of grantees without weakening American science.

My take: in the case of medium- or long-term instability in federal science granting, the best approach is for Congress to produce legislative fixes. In addition, though philanthropy doesn’t have the scale of the federal government, it should step up and expand basic research giving. While university funding to backfill terminated grant funding is useful in the short term, it’s unrealistic for most universities in the long run. Similarly, state-level funding may be useful as a short-term fix, but unless the federal government divests from research on a large scale, it is inefficient for states to take on this role.

Final thoughts

Midstream grant terminations impose real costs: interrupted research, a weakened PhD pipeline, and chilling effects on high-risk science. If terminations become a norm that persists across administrations, the damage to American science could be substantial. The likelihood of this becoming a norm, though, is unclear.

In the near term, universities and philanthropies have stepped in with emergency funds. More durable solutions like automatic payouts for terminated grants, limits on termination authority, or a more diversified federal science portfolio require congressional action. Given the polarization that would enable tit-for-tat terminations, such fixes won’t come easily. But both parties benefit from a strong science ecosystem, and that shared interest offers some grounds for compromise.

1. According to Grant Witness estimates, as of 12/5/25 there are 3,501 terminated grants at NIH and NSF, worth a combined $2.5 billion. The government has also terminated research grants at NOAA, USDA, EPA, and elsewhere, but those cancellations are more difficult to track.

2. These lead to Ozempic, Polymerase Chain Reaction (PCR) tests, and an improved bullet train, respectively.

3. Other Transactions are neither grants, nor contracts. They’re flexible procurement mechanisms that agencies like the Department of Defense and NASA have used effectively when conventional methods won’t do the trick.