Added Time: Our Monthly College Search Newsletter

June Update:

Big Changes & What It Means For You

You may be hearing about a possible settlement in House v NCAA, where the NCAA is attempting to settle several lawsuits based on the O’Bannon (intellectual property/NIL) and Alston (educational expenses) cases that the NCAA litigated to the Supreme Court and lost decisively. The NCAA is in a VERY difficult legal position. The Supreme Court has already indicated that it regards NCAA rules and limitations on recruiting, transfers and compensation with great suspicion and the parties in the consolidated “House” cases are in a class of students who the court has already determined were injured by NCAA policies that are impermissible. This means that both the NCAA and the plaintiffs have an incentive to settle. The NCAA doesn’t want to pay to fight a lawsuit they are nearly certain to lose, and the plaintiffs have an interest in getting paid now rather than years in the future.

The settlement terms released publicly will dramatically change the landscape of Division 1/FBS athletics (to the point where it’s not entirely clear how they will fit with the larger NCAA structure) AND do not protect the NCAA from more litigation down the road. Once again, Charlie Baker and the NCAA office in Indianapolis are setting the colleges up for immediate losses and even more problems in the future rather than seizing the moment to move towards a sustainable future for students, colleges and the NCAA as a whole.

Let’s look at the key pieces of the proposed settlement:

  • Plaintiffs will receive over $2.75 BILLION (with a “B”) from the colleges to be paid over a 10-year period. The money would come from the NCAA and future media payouts AS WELL AS from the colleges through a formula that favors the “Power 5 (4?)” schools and overcharges G6, FCS and non-football conferences who were not at the table when these payoffs were negotiated.
  • The creation of a student payout “salary cap” that schools can opt into. This would allow schools to pay athletes up to 22% (and the number is set to rise slightly over time) of the “average power conference revenue sharing contribution.” So about $20 million per year, per school. It is important to note this number would be a LIMIT on payments (schools would opt in and then decide how much they will pay as long as they stay UNDER the cap). These payouts would be IN ADDITION to scholarships, NIL revenue, health care, and other benefits that student-athletes already receive.
  • Ends scholarship limits, which have become less meaningful with the rise of NIL payments, replacing them with roster limits. The extent of those limits is not yet clear to me.
  • The settlement does NOT address other legal challenges to the NCAA, especially efforts to classify student-athletes as employees, which seem likely to eventually succeed. Ironically, the years long effort to make student-athletes employees and subject them to minimum wage and other labor laws may ultimately benefit the colleges rather than the students given the other pieces of this agreement.
  • The settlement also does NOT bind future students who opt out of the agreement. It essentially sets a revenue “floor” for the next round of negotiations or possible collective bargaining. It also doesn’t address transfer regulations or efforts to provide clarity on NIL.
  • Critically, this settlement is ONLY about Division 1. It will create a more significant gulf between D1 and D2/D3/NAIA/JUCO… what that will ultimately mean is difficult to predict.

So, if you are an elite recruit for 2027 or beyond… you may be looking at substantially more money than seemed possible only a year or two ago. If you are outside the top 25 or 50 prospects in your sport, the trickle-down effect of these changes is more difficult to predict. You will hear about dropping programs and other cost-cutting moves, but I would be skeptical of those (and, in the short term, Title IX concerns). The uncertainty may slow realignment in Division 1 for a period of time, as well as “upward drift” of D2 schools TO Division 1, but probably not for long. For the Ivy League schools and their academic competitors, it will be interesting to see how they adapt to this brave new world of direct student-athlete compensation!

 

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