The moves come despite the Senate passing a bipartisan continuing resolution that would block the overarching OMB rule until mid-December. The government says it received nearly 500,000 comments on that proposed rule, placing a burden on OMB to respond to them all. Lawyers for advocacy groups have already threatened to sue if the OMB finalizes the rule.
Agencies Mirror OMB Grant Making Proposal
On Monday, the Education Department published a proposed rule allowing the education secretary to terminate grants “for convenience.” The Education Department rule would also require states and subgrantees to comply with the president’s executive orders, which do not carry the force of law. Additionally, the department proposed awarding competitive preference to grant applicants who charge the government lower or zero indirect cost rates.
The National Science Foundation closed its public comment period Monday on a similar NSF proposal. The text includes a reminder that the agency may “act immediately to suspend or terminate [grants] if needed to protect government interests.” The NSF proposal directly states its aim of “aligning with the proposed revisions to the Office of Management and Budget’s (OMB) Uniform Guidance.” Other federal departments may follow suit.
The NSF proposal had received more than 3,000 comments as of publication time Monday. While that number was bound to grow by the midnight deadline, it is a far cry from the nearly half a million comments on the OMB proposal. By pushing these agency-specific rules, the administration aims to implement its vision for federal grants even if the central OMB rule fails.
Amanda Fuchs Miller, president of Seventh Street Strategies and a former deputy assistant secretary for higher ed programs during the Biden administration, called the strategy a “runaround.” She noted that courts rejected the administration’s efforts to cancel grants at will last year. Now, the administration is trying to assert similar power through individual agency proposals to avoid drawing hundreds of thousands of public comments.
“This is like a runaround—if the Congress blocks the OMB rule or delays it, they will still be able to do a lot of the same things,” Miller said of the Education Department proposal. She added that the rule will make grant making more ideological and add “huge unpredictability” for colleges, who could see their grants canceled at any point.
Higher Education Groups Oppose Indirect Costs Caps
Higher education advocacy groups have mobilized against the agency proposals. American Council on Education President Ted Mitchell submitted a comment Monday on behalf of ACE and 24 other groups expressing “deep concerns” about the NSF proposal. Mitchell urged the agency to remove provisions that rely on OMB’s proposed rule before it is finalized.
“We urge NSF not to finalize the GFA [Guidance on Financial Assistance] as drafted and to remove provisions that rely upon or implement elements of OMB’s proposed rule before that rule has been finalized,” Mitchell wrote.
ACE Vice President Sarah Spreitzer noted that OMB has not even responded to the comments on its proposal yet. She said taking actions out of order is not new for the administration. “They’ve been taking these actions for the past year and a half,” Spreitzer said. She added that the administration’s moves have “caused a lot of chaos, and I think this is retroactively going back to provide the structure for those decisions and to allow for those decisions to continue.”
Association of Public and Land-grant Universities President Waded Cruzado warned that institutions might build compliance infrastructure around a standard that federal regulation does not ultimately require. She called for parts of the NSF rule to take effect only after the OMB uniform guidance is finalized. Cruzado noted that APLU previously identified several provisions in the OMB proposal that warrant significant revision, including changes to merit review, discretionary termination, and allowable costs.
The Education Department rule specifically targets indirect costs—the amount of a grant dedicated to overhead such as administrative salaries and lab maintenance. The administration has repeatedly tried to cap indirect cost rates, only to be stopped by judges and Congress. The department estimates that 750 new grant recipients would apply annually to programs offering this competitive preference. The agency projects an annual transfer of $45,000,000 from indirect costs to direct costs.
NSF spokesperson Mike England stated that the agency is committed to reducing administrative burden by streamlining requirements. He added that any final changes from the ongoing OMB review process will be incorporated into the NSF guide where applicable.
What Happens Next
The Education Department will accept public comments on its proposed rule until Sept. 23 and plans to finalize the regulation in late 2026. Meanwhile, the NSF will review the more than 3,000 comments received on its proposal. If the Senate’s continuing resolution passes the House and is signed into law, the central OMB rule will remain blocked until mid-December, leaving these agency-specific rules as the primary vehicle for the OMB grant takeover.
Colleges and universities face mounting unpredictability as they navigate these shifting federal grant requirements. Advocacy groups have already threatened to sue if OMB finalizes its overarching rule, signaling further legal battles if the agency-specific regulations move forward. Institutions must prepare for a landscape where grant funding could be suspended or terminated at any point to protect government interests.
— Sofia Alvarez, government desk, AXO News