The age of amateurism in collegiate athletics has come to an end, fundamentally changing the landscape of college sports. The National Collegiate Athletic Association recently agreed to a $2.8 billion settlement that allows college athletes to receive direct payments from their schools in addition to scholarship money and external sponsorships. This landmark decision follows the Supreme Court’s 2021 ruling in NCAA v. Alston, which permitted athletes to profit from their name, image, and likeness
Traditionally, most student athletes did not benefit significantly from independent partnerships. However, the emergence of “collectives” has altered this dynamic. These are external organizations, funded by fans and donors, that pool resources to support athletes financially. Although boosters cannot directly coordinate with athletic departments or pay students for their on-field performance, they can compensate athletes for other activities, such as promoting a booster’s company.
This new settlement requires athletic programs to directly pay their athletes while still allowing them to benefit from NIL opportunities. Additionally, the settlement includes back pay for past student athletes, ensuring they are compensated for their previous participation. The NCAA, along with better-off schools and conferences, will bear most of this financial burden. However, less wealthy institutions will still need to contribute, posing significant challenges for these schools.
The conversation around this change has largely focused on its impact on the nature of college sports. With athletes now receiving direct payments and sponsorship deals, college athletics increasingly resembles professional sports. This shift raises questions about the sustainability of amateurism in this new era. Yet, the broader economic consequences for higher education institutions have not been fully explored.
Experts warn of a looming demographic cliff due to declining birth rates in the U.S., which will soon lead to a significant decrease in high school graduates. Kevin Carey, vice president for education policy at New America, highlights that this decline will result in lower tuition revenues for colleges. Coupled with ballooning athletics budgets, this demographic shift will exert immense strain on smaller and regional institutions, potentially leading to the downsizing or elimination of their athletics programs.
Public confidence in higher education is also waning. A 2023 survey revealed that only 36% of Americans had a high level of confidence in higher education, down from 57% in 2015. This skepticism, combined with the Biden administration’s problematic rollout of a new federal financial-aid form, has contributed to a decrease in undergraduate enrollment. Consequently, many institutions may face financial challenges as they struggle to balance athletics budgets with declining revenues.
Title IX regulations will likely mandate comparable compensation for male and female athletes, further complicating the financial landscape for colleges. Schools will need to navigate potential lawsuits and internal conflicts among different sports programs vying for fair pay. Given that revenue-generating athletics departments are the exception rather than the rule, this new compensation model will be particularly burdensome for many institutions.
Larger schools with expansive athletics departments may manage to navigate these changes, but smaller institutions will need to think creatively to attract students and maintain financial stability. Some may choose to reduce their athletic budgets and reallocate funds to other priorities, such as debt reduction, facilities, and academics. This strategy could involve reimagining the role of sports clubs or developing a corporate image that distances the institution from athletics.
As college presidents and administrators face tough decisions in the coming years, the transformation of collegiate athletics will continue to unfold. While athletes stand to benefit from fair compensation, the financial strain on higher education institutions will accelerate. The new NCAA settlement may ultimately serve as a catalyst for significant changes in the structure and priorities of collegiate sports programs across the country.
