$2.7 Billion Settlement Outlines New Ways Colleges Can Compensate Student Athletes

Since its inception, the NCAA has restricted schools from paying student athletes anything beyond scholarships that covered tuition and the cost of attendance. However, with the continued popularity of college sports and the revenue they generate, student athletes are looking for their cut. In 2021, the NCAA began allowing players to be compensated for their Name, Image, and Likeness (NIL). Since then, NIL deals have become the customary way for college athletic programs to attract and pay their players, with star players like Duke’s Cooper Flagg and Colorado’s Shedeur Sanders earning millions of dollars. Now, a recently approved settlement sets out to change the landscape of student-athlete compensation once again.

The settlement comes from three different lawsuits involving compensation for student-athletes, brought by 390,000 current and former NCAA student athletes against the NCAA and five athletic conferences. It can be broken down into two major parts:

(1) compensation for former NCAA athletes, and

(2) compensation for current NCAA athletes.

For former NCAA student athletes who played before 2021 and prior to the introduction of NIL contracts, the NCAA has agreed to pay $2.75 billion. For current student-athletes, the settlement outlines a new system that allows colleges to pay players directly. It sets an initial salary cap of $20.5 million but allows schools to decide which players to pay and how much to pay them.

The settlement also replaces scholarship limits with roster limits and establishes a third-party clearinghouse to evaluate the reasonableness and fair market value of NIL deals. The NIL deal evaluation aspect aims to prevent schools from circumventing the new compensation system, yet it is facing criticism as it is unknown how much power the clearing house will have over these deals.

As NCAA regulations and laws are ever-changing, it is important to fully understand the nuances of student athlete compensation deals. If you are a student athlete or work with one, consulting an attorney well-versed in athletic and/or endorsement contracts can help ensure that each agreement aligns with your interests and applicable laws.