Following a recent Supreme Court ruling that prompted a National Collegiate Athletic Association (NCAA) policy change allowing college athletes to make money from selling the rights to their names, images and likenesses (NIL), many in the financial aid community are left wondering how the seismic shift in the world of college athletics will impact students’ financial aid and grants.
How the issue intersects with Title IV aid rules such as cost of attendance, professional judgment, estimated financial assistance, and income on the FAFSA, is top of mind for financial aid administrators in recent weeks.
While much of the focus to this point has been on the rush for college athletes to secure deals and start to monetize their NIL, it has raised questions about how it all will impact grants and financial aid that student-athletes receive.
The interim policy change this month from the NCAA allows college athletes to profit off of autograph sales, sponsored social media posts or ads, personal YouTube/Twitch streaming channels, training lessons and camps, speaking engagements, personal merchandising, endorsement deals and more.
Before the change, college athletes received cost of attendance stipends from the NCAA but were not permitted to profit off their NIL. And it's clear that student athletes who aim to financially benefit from the policy change also utilize need-based aid.
In 2015-16, the most recent year for which data is available, the National Postsecondary Student Aid Study found that 48.5% of students on athletic scholarships also received need-based and 31.3% of scholarship athletes received a Federal Pell Grant.
Most of the money made from NIL is considered additional taxable income and has to be reported on any need-based financial aid application, such as the FAFSA. If an athlete’s income increases, it could potentially reduce eligibility for need-based aid.
Since the FAFSA uses two-years-prior income information, student-athletes — or any college student profiting from NIL — could make money before it would normally be reported on their FAFSA.
Experts say it's important for student athletes to fully understand their aid packages and ask questions so they know how profiting from NIL will impact their aid. For the financial aid community, there is still a lot to sort out.
"This policy change adds new twists to the processes financial aid administrators use to assess a student's level of need,” said NASFAA’s director of policy analysis Karen McCarthy. “We're just beginning to sort through all the implications and unanswered questions."
While the ultimate impact of NIL legislation moving forward in states across the country remains unclear, it's becoming evident that a new era has arrived in college athletics, and with it comes questions for financial aid offices.
Aid administrators from across the country have raised questions on how the monetization of student athletes’ NIL will impact their work, including:
How conflicting information rules may apply when the school and possibly the general public is aware of financial contracts between student athletes and outside entities.
How compensation and benefits that are not income are considered in need analysis.
How student athletes will be counseled on navigating the new financial landscape and making sound financial decisions.
In some cases, existing guidance from the Department of Education (ED) can be applied to the context of student athlete compensation. In other cases, supplementary guidance from ED may be necessary. NASFAA will be staying on top of this issue as it develops and will send any requests for guidance to ED, as appropriate. Stay tuned to Today’s News for updates.
Publication Date: 7/21/2021