The NCAA's landmark decision to permit direct compensation of student-athletes beginning in July 2025 heralds a fundamental reimagining of collegiate sports. Accelerated by a $2.8 billion settlement, this moment challenges universities to balance competitive excellence, educational mission and fiscal responsibility in new ways.
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Author: Erik Henry Smetana

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Higher education institutions face a critical question: How can they create compensation systems that enhance the unique value of collegiate athletics rather than diminish it? Leaders must draw on emerging best practices and approaches to ensure institutional success, educational mission, equity and student-athlete welfare.

The pending change to direct student-athlete compensation isn't merely a compliance challenge — it's an opportunity for institutional leadership to shape collegiate athletics' future.

Understanding the new paradigm

The transformation unfolds against a backdrop of mounting pressure for reform. Recent developments illuminate the scale of change:

  • A $2.8 billion settlement acknowledging past inequities in athlete compensation1
  • Growing recognition of athletes' rights to benefit from their contributions
  • Evolving public sentiment favoring fair compensation for student-athletes
  • State-level initiatives, such as Ohio's recent action to allow intercollegiate athletes to earn compensation for their names, image or likeness2

This confluence of forces creates a mandate for comprehensive change that extends far beyond simple compliance with new regulations.

Building a strategic compensation framework

Successful navigation of this new era requires a holistic approach that addresses three core dimensions:

Value creation and distribution

Equity and access

Integration with educational mission

Rather than viewing compensation as a cost center, institutions should frame it as an investment in human capital. This approach requires:

  • Developing metrics that capture both athletic and academic contributions
  • Creating incentive structures that reward holistic student-athlete development
  • Building sustainable funding models that align with institutional resources

The commitment to equity must be foundational, not supplemental. Commitment means:

  • Implementing transparent, merit-based compensation tiers that acknowledge different sports' contexts
  • Ensuring gender equity through proactive program design with a focus on Title IX compliance, creating opportunities for athletes in both revenue and non-revenue sports

Compensation programs should enhance, not compete with, educational objectives by:

  • Linking compensation to academic achievement and progress
  • Providing financial literacy education and career development support
  • Creating mentorship programs that connect athletes with alumni in their fields of study

Although viewing student-athletes as employees represents the underlying premise, a more beneficial view would consider student-athletes as employees as well. With this mindset, universities (the employers) will benefit from more engaged students (the employees) and achieve the same similar positive outcomes that organizations with highly effective compensation programs do.

Implementation: A phased approach to excellence

Success requires careful orchestration across multiple stakeholders and timeframes:

Immediate priorities (through June 2025)

Launch (July-December 2025)

Optimization (2026 and beyond)
  1. Form a cross-functional strategic planning team incorporating athletics, finance, human resources, compliance, legal and academic perspectives.
  2. Conduct a comprehensive impact assessment covering financial, cultural and operational dimensions.
  3. Develop preliminary compensation frameworks and funding models.
  4. Begin stakeholder engagement and communication planning.
  1. Implement pilot programs with select sports programs.
  2. Establish monitoring and adjustment mechanisms.
  3. Launch comprehensive financial literacy and support programs.
  4. Begin collecting data for program evaluation and refinement.
  1. Refine compensation models based on early implementation lessons.
  2. Scale successful programs across all eligible sports.
  3. Develop advanced analytics for program optimization.
  4. Share best practices and lessons with peer institutions.

Minimize risk, maximize opportunity

Successful programs will balance risk mitigation with opportunity capture.

Risks

Opportunities
  • Title IX compliance and gender equity
  • Financial sustainability and budget impact
  • Academic integrity and athletic balance
  • Public perception and stakeholder relations
  • Legal action on behalf of student-athletes (especially around employment law)
  • Enhanced recruitment and retention of top talent
  • Strengthened institutional brand and reputation
  • Improved student-athlete outcomes and engagement
  • Innovation in program design and delivery

Compliance and oversight requirements

The student athlete pay framework must establish robust compliance mechanisms that account for the diverse regulatory environments in which athletic departments operate.

For public institutions, policies must address:

  • State employee classification implications
  • Public records requirements
  • State-specific compensation limits
  • Legislative oversight mechanisms

For private institutions, frameworks should consider:

  • IRS reasonable -compensation standards
  • Private inurement restrictions
  • Donor involvement guidelines
  • Endowment usage parameter

Looking ahead: Shaping the future of collegiate athletics

The transition to direct compensation represents more than a policy change — it's an opportunity to reshape collegiate athletics for the 21st century. Success will require vision, courage, and commitment to innovation while honoring the fundamental values of higher education.

Institutions that approach this challenge strategically, with a focus on creating sustainable value for all stakeholders, will emerge as leaders in defining the future of collegiate athletics.

The key lies not in merely complying with new requirements but in leveraging this moment to build stronger, more equitable athletic programs that better serve student-athletes while advancing institutional missions.

Gallagher can help

Gallagher offers compensation consulting to support higher education institutions with comprehensive solutions that align your compensation philosophy with your strategic goals. Our experienced consultants support workforce design, compensation, classification and strategic program implementation. We leverage data and technology to help you build trust with your faculty, staff and students.

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Author Information

Sources

1Russo, Ralph D., "NCAA, leagues back $2.8 billion settlement, setting stage for current, former athletes to be paid" AP, 23 May 2024.

2 "Senate Bill 187," The Ohio Legislature, accessed 26 Feb 2025.

Disclaimer

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