Starting this fall, NCAA Division I schools will be able to pay players directly up to a salary cap of $20.5 million.
Jae C. Hong/AP
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Jae C. Hong/AP
A federal judge has given the green light to the extensive class-action legal agreement known as House v. NCAA, ushering in a new era for college sports.
Beginning this upcoming fall, colleges and universities in the NCAA’s top division will have the ability to compensate athletes directly for the first time. There will be a salary cap set at $20.5 million per school. Additionally, over $2 billion will be distributed to former college athletes who were previously restricted from earning money while in school.
“Despite some concessions, the settlement agreement will provide significant relief for the members of the settlement classes,” U.S. District Judge Claudia Wilken stated in the order issued on Friday.
The approval of the settlement “marks a monumental advancement for college sports,” said NCAA President Charlie Baker. Baker also added that direct payments to players signify a positive change that was long overdue.
Origins of the settlement
For many years, college athletics were governed by amateurism, with NCAA regulations prohibiting schools from compensating players beyond scholarships covering tuition and other educational expenses.
However, the financial aspect of big-time college sports has grown significantly in recent decades. Athletic departments at top-tier universities now generate hundreds of millions of dollars from various revenue streams.
“The money involved became too substantial to ignore the athletes’ right to compensation,” noted Noah Henderson, former collegiate golfer and current director of the sports management program at Loyola University Chicago.
The House settlement emerged from three separate lawsuits regarding compensation for college athletes. The plaintiffs, a group of approximately 390,000 current and former college athletes, sued the NCAA and five athletic conferences. The negotiation process lasted over a year.
How the settlement functions
The House settlement comprises two main components: one addressing past issues and the other focusing on the future.
Regarding the past, the NCAA and schools have agreed to pay $2.75 billion to former college athletes who competed before 2021. This is the year when the NCAA revised its rules to allow players to enter into licensing agreements to profit from their name, image, and likeness rights (NIL). Notably, male football and basketball players will receive substantial payments, with standout athletes from major schools potentially earning five to six figures.
Looking ahead, the settlement establishes a new system allowing schools to compensate players directly. Schools will have the autonomy to choose which athletes to pay and determine the amounts. The bulk of the compensation is expected to be allocated to athletes in revenue-generating sports, primarily football, men’s basketball, and women’s basketball.
Moreover, the settlement introduces a salary cap. Each school’s player compensation across all sports will be subject to a cap initially set at $20.5 million, potentially increasing to $33 million by 2035. Additionally, roster limits will replace traditional scholarship limits for each sport. Schools can offer as many scholarships as they wish, but team sizes will be restricted.
It is anticipated that roughly half of the NCAA’s 365 Division I schools will adopt the new framework. This is either due to their conference affiliation or by choice. Some schools, particularly those in lower football divisions or without football programs, may opt out of the settlement and continue compensating athletes solely through scholarships and other expenses.
Name, image, and likeness
Since the NCAA permitted players to earn compensation from their name, image, and likeness rights in 2021, NIL payments have essentially created a pay-for-play system. Notable athletes like Duke’s Cooper Flagg have amassed millions of dollars through these agreements.
Another significant aspect of the settlement is the establishment of a third-party clearinghouse to review licensing agreements for “fair market value,” particularly targeting extravagant NIL deals.
This concept has faced criticism within the college sports community and is likely to encounter legal challenges, according to Sam Ehrlich, a college sports litigation expert at Boise State University.
“There will be substantial questions moving forward about the powers of that clearinghouse and whether it is even legally permissible,” Ehrlich stated in a recent interview with NPR.
