Game-changer: NCAA settlement means billions for college athletes—Are scholarships a thing of the past?

The long-standing debate over compensation for college athletes has reached a major milestone as the US National Collegiate Athletic Association’s (NCAA) $2.78 billion settlement with colleges received preliminary approval. This historic deal, approved by U.S. District Judge Claudia Wilken, sets the stage for a significant transformation in college sports, allowing schools to directly pay athletes and share the vast revenues generated by their performances. This decision is expected to pave the way for a new era where college athletes are seen not only as students but also as vital contributors to a multi-billion-dollar industry.

Under the new arrangement, athletes can begin applying for compensation starting October 18, 2024, with a final approval hearing scheduled for April 7, 2025. The settlement not only introduces a framework for schools to directly share revenue with athletes but also resolves multiple antitrust lawsuits against the NCAA, including one spearheaded by Grant House, a former Arizona State swimmer. The NCAA, alongside the major Power Five conferences, is set to distribute millions of dollars in the coming years to compensate athletes who were previously barred from earning through Name, Image, and Likeness (NIL) deals before 2021. This settlement aims to help athletes recover a share of the $2.576 billion set aside for those who played from 2016 onward, an acknowledgment of lost income opportunities. The settlement also signals the beginning of a fundamental change in how college sports operate, potentially setting a precedent for future revenue-sharing models.

Landmark Revenue-Sharing Model: A Game Changer for College Sports

The settlement introduces a revenue-sharing model that could revolutionize college sports, allowing schools to allocate up to 22% of their average revenue to athletes. Schools within the Power Five conferences—which include the Atlantic Coast Conference, Big Ten, Big 12, Pac-12, and Southeastern Conference—will establish a pool of around $21.5 million in the first year of the agreement. While this is a far cry from the earnings seen by professional athletes, it marks a significant step toward athletes being able to share in the revenues they generate. This model is expected to create a more balanced system, providing compensation that reflects the athletes’ contributions to their schools’ financial success.

However, the impact on non-revenue sports, which have historically played an important role in U.S. college sports and Olympic rosters, remains a significant concern. Schools are now scrambling to balance budgets and find ways to support the new athlete payment system without sacrificing funding for these programs. The effects on smaller sports and their future viability are still uncertain, raising questions about how schools will navigate the complex financial landscape without compromising their commitment to a diverse athletic program. NCAA President Charlie Baker hailed this preliminary approval as a “significant step” toward ensuring stability for college athletics, noting that “the settlement will deliver increased benefits to student-athletes for years to come.”

The revenue-sharing model, set to begin during the 2025-26 academic year, will allow schools to pay athletes directly with funds they generate, up to a capped amount equivalent to 22% of their average revenue. While not all schools are obligated to participate fully, the biggest programs are expected to lead the charge. The new model replaces scholarship caps with roster limits, allowing for greater flexibility in recruiting while maintaining compliance with the spirit of Title IX. This shift in the structure of college sports is intended to create a more equitable system, where athletes are adequately rewarded for their contributions on the field, while still preserving the educational and developmental aspects of college athletics.

Uncertain Future for College Athletics Amid Title IX Concerns

Despite the promising changes, there are lingering uncertainties about how the new revenue-sharing model will comply with Title IX, the federal law ensuring gender equity in education, including sports. Given that 90% of the settlement is expected to go to football and men’s basketball players, some critics have raised concerns that it could be in violation of Title IX. This has sparked debates on whether the current structure is sustainable and how it might impact female athletes, who may be at risk of receiving a smaller share of benefits. Ensuring gender equity in the new model will be a critical challenge, and schools will need to navigate these complexities carefully to avoid potential legal ramifications.

Additionally, litigation around the rights of college athletes to unionize and be recognized as employees remains ongoing, leaving open questions about the ultimate scope and future legal challenges that could arise from the new payment system. If college athletes are eventually granted the right to unionize, it could fundamentally change the landscape of college sports, introducing collective bargaining and potentially redefining the relationships between athletes, universities, and athletic departments. The NCAA is also advocating for a unified federal law to regulate NIL deals, which are currently subject to a patchwork of state regulations and NCAA policies. NCAA President Charlie Baker emphasized the importance of federal action to avoid inconsistencies and ensure fairness for all athletes across different states.

Expert Insights: What Industry Leaders Are Saying

Legal experts and industry leaders have described the approval as a “revolutionary change” that will finally allow college athletes to share in the billions of dollars in revenue that they help generate. Many believe that this settlement is the first step in creating a more equitable model for college sports, one that values athletes not just as students, but as significant contributors to a multi-billion-dollar industry. The current model of college sports has long been criticized for exploiting athletes while reaping massive financial rewards, and this settlement marks the beginning of addressing those disparities.

Industry insiders have also highlighted that “change has to be embraced” and that the new model will provide a fairer structure for compensating athletes who generate substantial revenues for their schools. It is believed that the changes brought by the settlement will help eliminate current loopholes where schools circumvent NIL rules through donor-funded collectives. The new approach is expected to bring transparency and fairness to the compensation process, ultimately benefiting both the athletes and the institutions involved.

The settlement also provides a 10-year injunction that aims to stabilize college sports while allowing the NCAA and conferences to maintain rules that level the playing field and reinforce the educational mission of athletics. This legal move is hoped to bring an end to decades of contentious antitrust litigation, although the settlement itself does not prevent future lawsuits. The 10-year injunction will serve as a buffer period, giving schools, athletes, and regulatory bodies the time needed to adjust to the new realities of college sports and to develop best practices for implementing the changes.

The settlement also provides a 10-year injunction that aims to stabilize college sports while allowing the NCAA and conferences to maintain rules that level the playing field and reinforce the educational mission of athletics. This legal move is hoped to bring an end to decades of contentious antitrust litigation, although the settlement itself does not prevent future lawsuits. The 10-year injunction will serve as a buffer period, giving schools, athletes, and regulatory bodies the time needed to adjust to the new realities of college sports and to develop best practices for implementing the changes.

The Road Ahead for College Athletes

If finalized, this settlement represents a seismic shift in college athletics, ending the NCAA’s long-standing prohibition on direct payments to athletes. However, it still leaves plenty of room for interpretation, particularly concerning NIL deals and their integration into the new system. The NCAA’s push for federal legislation will be crucial in determining how effectively these new rules will be implemented and whether the benefits will be distributed equitably across all athletes, irrespective of gender or sport. The settlement also raises questions about the ongoing role of NIL collectives, which have become a significant part of the college sports landscape. Schools will need to determine whether to bring these collectives in-house or find new ways to align them with the revenue-sharing model.

While the $2.78 billion settlement is a monumental step towards modernizing college sports, it remains to be seen how well these changes will address the complex financial dynamics within college athletics. The integration of a revenue-sharing model will likely face numerous challenges, from determining the exact distribution mechanisms to ensuring compliance with federal and state regulations. With a final hearing scheduled for April 2025, this deal could redefine what it means to be a student-athlete, shifting the focus from mere participation to a model where athletes are compensated for the value they bring to the university system. The outcome of this settlement has the potential to not only transform the landscape of college sports but also set a precedent for how amateur athletes are treated in the future, providing them with the financial recognition they deserve while preserving the integrity of collegiate athletics.