College Athletes and Personal Finance - The Missing Link

Written by Katrina Melnik & Ayden Gautheir

How Do College Athletes Make Money? 

In late June 2021, the Supreme Court ruled against the NCAA in a case regarding NIL (name, image, likeness).  This required the association to then effect a rule change that allowed college athletes to participate in deals like advertisements and endorsements.  While these changes are still very much in their infancy, athletes have already started to sign incredibly lucrative contracts with companies.  In September 2023, UConn basketball player Paige Buckers signed with Nike, pl

acing her at an estimated $643,000 net NIL deal worth.  This ruling also allows athletes to accept money from boosters, third party donors tied to a given university.  All the emerging NIL policy and subsequent contracts have resulted in NIL being responsible for 80% of college athlete income.  More recent changes in the legal landscape have provided even more avenues for players to make money.  In early March 2023, the Dartmouth men’s basketball team voted to unionize with the Service Employees International Union, allowing them to negotiate their pay and other aspects of the game such as practice time and travel.  The unionization extends pay to all members of the team, allowing lesser-known players that do not have NIL deals to generate revenue from the sport.   

The Statistics 

With NIL and other payment policies rapidly evolving and relaxing, it is no wonder that athletes' income is expected to double in the next 7 years.  However, this rise in revenue does not come without challenges.  

The Current Solution 

There are a number of personal finance solutions currently on the market.  Financial advisors and family offices are the most traditional way of managing large sums of money.  The cost of a financial advisor varies as some charge a fixed fee or, more commonly, a ~1% AUM fee if they are actively managing a portfolio.  Financial management apps have expanded tremendously over the past few years, ranging in price from free to a few dollars per month. They feature a breadth of functions, including checking credit scores, tracking spending and investments, and displaying cash flow or net worth.  For college athletes, there are fewer tools available, yet the tools are tailored specifically for personal finance.  Schools often require athletes to complete a course in financial literacy, however, these courses often do not cover athlete-specific problems such as taxation and navigating NIL contracts.   

Where are we Headed? 

This influx of money to collegiate athletes comes with an increased need for financial literacy. Athletes now require an understanding of how taxes apply to NIL income, which is made more difficult by the potential unionization of these athletes. Navigating compliance with the SEC and NCAA is crucial for athletes, furthering the importance of this understanding. Learning how to invest their earnings wisely is another pivotal piece of this puzzle. As some of these athletes are earning more than they ever will, securing their financial future with calculated and safe investment decisions is vital. Lastly, strong debt management by avoiding predatory loans and managing existing debt well will be a requirement for these athletes. Fortunately, specialized advisors and tech-enabled solutions help fill in these gaps, providing budget guidance, investment options, and educational resources on financial management.  

As these athletes mature through their careers, the emphasis will likely shift beyond managing the large sum of money they have in college to planning to ensure long-term financial health. This could have implications for career planning, entrepreneurial opportunities and education, and philanthropy and community engagement. The introduction of NIL earnings presents the opportunity for student-athletes to set themselves up for success regardless of if they pursue a professional career or not, building a strong foundation for their future.  

The Future of NIL? 

NIL presents lots of uncertainties in the face of regulation and unionization. While it is still new, there are many changes to come regarding the status of student-athletes and their involvement with endorsements and boosters. Regulations on the products or services athletes can promote and maintain competitive balance are predictable. Unionization and collective bargaining could lead to new rights for athletes such as guaranteed minimum income and improved compensation structures and benefits for athletes. All of which even the playing field for lesser-known athletes who may not secure major NIL deals.  

As NIL continues to evolve, so will the regulatory environment and potentially athlete rights through unionization. Finding the right balance between fair compensation and maintaining the educational core of college athletics will be a continuous effort. However, by addressing the financial literacy needs of athletes and promoting responsible financial management, we can empower them to capitalize on the opportunities presented by NIL and build a secure financial future, both on and off the field.