Recently Spry co-hosted a panel webinar with NACDA titled “NIL: The Impact on Need Based Aid”. While one of Spry’s own Compliance Advisor, Todd Hairston, was leading the discussion, there were some great questions popping up in the webinar’s chat room. We wanted to share the Q&As with you as a way to keep the NIL conversation going. We are all learning from each other as we navigate this new NIL landscape together! Read on below to see the Q&A and the recording of the panel can be found at the bottom of the article!

Questions

 

Is a student-athlete allowed to decline a NIL package if the financial implications are not positive? 

The direct answer is yes, student-athletes will certainly be allowed to decline an NIL offer, however we recommend that schools steer clear of advising students to accept or reject opportunities.  Students should work with compliance/financial aid to acquire all of the necessary financial information and then make an individual decision on their own as to whether it is ultimately beneficial.

Student-athletes will face tough decisions about NIL opportunities. Is short-term earnings potential worth the long-term risk? Education will be essential to ensure student-athletes have the resources and information needed to make informed decisions.

 

How do we prevent the “horror NIL stories”?

We feel that the “horror stories” can be prevented if institutions are proactive and not reactive to NIL initiatives.  The opportunities for student-athletes are coming.  By having a plan in place institutions will avoid the last minute decision-making that can lead to compliance issues and overworked compliance staff.  Download’s Spry’s NIL Ramp Up Guide to help you prepare!

 

How many student-athletes do you anticipate making enough money to move the EFC needle two years from now (because FAFSA is looking so far backwards) to lose Pell? It would seem only freshman and sophomores would have this issue OR am I missing anything? 

While it’s true that current juniors and seniors likely won’t be impacted, NIL will need to be a consideration for all future classes of student-athletes. We believe that 50-70% of student-athletes will take advantage of NIL. If a student-athlete’s family is on the threshold of entering a higher tax bracket, even modest NIL opportunities could have a meaningful impact. If a student-athlete has any eligibility remaining, NIL earning opportunities might impact their grants and awards. 

 

Student-athletes will need to complete a federal tax return to report the income earned and/or report the income on tier FAFSA. What happens when an athlete fails to report the income on the FAFSA. Who will track that? 

Ultimately, the student-athlete is responsible for reporting and communicating changes to their income and  FAFSA. If the student-athlete fails to report the additional income, there could be negative tax consequences and loss of financial aid. Furthermore,  if the student-athlete earns over $600 dollars from their NIL engagements, they will receive a 1099 at the end of the year depending on the opportunity type. As athletic administrators- and educators-, it’s our job to provide student-athletes with the information and resources to successfully manage and understand the potential benefits of earning compensation while sharing the potential pitfalls taxes. 

It is also the practice on most campuses that Financial Aid offices will select a certain number of student’s profiles at random each year for verification.  This is an additional checkpoint to ensure that students are accurately reporting their financial information.

 

One concern I have from working in a couple different campus environments is will we see an obligation on institutions to ‘report’ when students are earning based on NIL? Or if the ‘payment’ is in-kind – gear, etc. – and not straight cash. Since we will be tracking opportunities, will we be put in a situation where we are obligated to report? Most institutions do not get involved in how an individual files their taxes, one administrator indicated to me that it would be between the individual and their accountant or the IRS. 

We feel it is important to provide the student-athletes with guidance and information to properly manage their NIL opportunities.  This includes tracking and providing reports and tax forms for all payments that are recorded within their Spry account.  Though the student-athlete is responsible for reporting all NIL income , Spry’s administrative platform provides administrators with checks and balances to ensure everyone remains compliant. 

 

How do you anticipate it (financial aid conversations) will be handled when student-athletes want to change their status to independent versus being a dependent (under their parents/guardians)?

Hopefully, this will be a conversation between student-athletes, their guardians/parents, and licensed financial professionals. For example, a student-athlete might create a business to conduct summer camps. If this scenario were to become reality, the registered business (and their revenue) could change how the student-athlete and their family/guardian handles their EOY taxes. 

This is also where institutional methodologies for assessing need based eligibility can come into play.  Some schools have more stringent requirements for whether students can be emancipated from their parents during the need assessment process versus being considered dependents.  Students and administrators should work closely with their financial aid offices as these requirements may vary from school to school.

 

Has anyone thought about how they will educate alumni, boosters, donors? 

Yes, we’ve thought about alumni, booster, and donor education. 🙂  Spry’s Educational Portal allows administrators to distribute content to alumni, boosters, and donors. We are also offering articles in our blog around insights and best practices around this education and communication as we ramp up to the finalization of the NIL legislation. You can read about booster involvement on our blog.

 

There are some states that require financial literacy education to be provided to student-athletes but some that do not. Is there any sense among College Athletic Directors as to whether or not they will require such education regardless of what applicable law may state?  

Educating student-athletes will make for a smoother adaptation of NIL rules and regulations.  While we feel it is important to provide educational content for institutions to utilize, each athletic department will have their own processes for preparing their student-athletes. Spry’s Educational Platform gives Athletic Administrators the ability to create and manage different forms of educational content, including articles, videos, podcasts, and quizzes. 

 

It seems like NIL is forcing everyone to take their compliance education initiatives to a new level so that all constituents are aware of what is coming and when passed how it all will function. How do you see this undertaking growing and do you see an opportunity for athletic departments to have to create positions (brand managers, tax professionals, etc) solely based on these aspects?

Great question! Some athletic departments will hire and create roles dedicated to helping their student-athletes navigate the complex NIL ecosystem. Other institutions will leverage on campus resources.  Education is a vital way athletic departments can empower its student-athletes to become successful. We are lucky to live in an age where these kinds of materials and courses can be created in a very engaging way and can be automated to reduce that burden on the athletic department, thus freeing up resources for other departmental initiatives.   

“NIL: The Impact on Need Based Aid” Webinar Recording

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The proposed NIL legislation will afford student-athletes with a host of new opportunities to generate revenue through a variety of ventures. Whether selling autographs, running camps or endorsing products, student-athletes will have the means to monetize their athletic abilities like never before. However, there are some potential unintended consequences associated with these NIL opportunities that could have negative financial ramifications for some student-athletes and athletic programs. I would like to address a few of those here.

 

While many student-athletes receive full or partial athletic scholarships, many others receive packages that consist exclusively of need-based institutional grants. Additionally, with recently adopted NCAA legislation making it much more feasible for student-athletes to stack need-based aid on top of athletic scholarship aid, a number of students will also be receiving a combination of both need-based and athletic money.

 

D1 and D2 Financial Aid Statistics

 

As many coaches know all too well, the ability to recruit student-athletes based on projected amounts of need-based aid is a critical component of optimizing NCAA mandated team scholarship limits and building successful programs, particularly in equivalency sports. But it can also be an important factor in the ability to recruit valuable walk-on student-athletes in the head count sports. Access to these need-based funds is determined by a student’s family financial profile. If that profile were to change as a result of NIL earnings, a student’s eligibility for need-based aid could be impacted.

 

Let’s say for example that a soccer player is being recruited by a program and decides to commit to the school based on a projected package of $20,000 in institutional need based aid plus a PELL grant of $5,000. However, due to previous NIL earnings, the need-based package in future years is decreased to $17,000 and the PELL grant is reduced to $3000. Such scenarios could have serious downstream implications for both the student and the program.

 

NIL Financial Aid Statistics

 

Need-based aid eligibility is not based on a simple dollar for dollar exchange. Therefore, the actual loss of need-based money could be greater than the revenue earned, particularly after taxes are assessed, and other third parties associated with procuring the NIL opportunity such as agents, attorneys, financial advisors, etc. are paid. Depending on the circumstances, it may be the case that accepting an NIL opportunity could result in a net loss for the student. If this were to occur, it could leave the student, and the institution, with a difficult dilemma.

 

Is the financial impact such that the student can no longer afford to attend the institution?

Is the coach expected to backfill the loss of need-based aid with athletic scholarship money?

Is the coach even in a position to do so and what precedent is set if they do?

Are there ramifications for recruiting if students are unhappy with how these issues are resolved?

 

All of these are intriguing questions. Since aid eligibility is determined based on income data from two years prior, the ramifications of increased income would not likely be felt immediately. Nevertheless, this is something that athletic departments should be preparing for in advance. At a minimum, this preparation will likely need to include extensive education for coaches, student-athletes and parents in an effort to make all parties aware of the potential impact of NIL and manage expectations appropriately. Athletic departments would also benefit from ensuring that clear lines of communication with campus financial aid offices exist so that student financial information can be shared efficiently and accurately. However institutions ultimately choose to approach it, creating strategies for how they intend to handle these new challenges that will be vital to their ability to navigate this new landscape in college athletics.

 

Todd Hairston Blog Author

 

In the previous installment, we highlighted some of the potential risks involved with boosters and NIL and touched on the importance of schools being proactive in their preparation to address these issues. Improving lines of internal communication between athletic fundraising units and compliance offices, as well as preemptive educational efforts for boosters were two avenues that were discussed.

In this installment, I will offer two additional areas institutions may wish to consider as they prepare for NIL.

Coordinate with Admissions Departments

Most institutions have some version of preferred admissions slots that can be extended to prospective students with unique skills and talents (e.g. athletic ability). The recent Varsity Blues scandal alerted many schools to gaps in their protocols which allowed outside parties to influence their admissions processes by making significant donations to the institution. With the advent of NIL, similar risk could now exist in the form of boosters offering NIL opportunities, in lieu of cash donations, in exchange for favorable admissions considerations. These types of quid pro quo arrangements would present a significant reputational and legal risk for institutions. One preventive measure in anticipation of this is to take additional steps to shore up athletics admissions processes to prevent these types of abuses from occurring.

Create Infrastructure

Many schools have been reluctant to acquire NIL software platforms prior to finalization of the legislation. Whether contracting with a third party provider or creating an in-house solution, it will be important for schools to have a tool that will allow them to capture and coalesce the vital pieces of information required to appropriately monitor booster activities within the NIL environment. Identifying disclosures that involve boosters and flagging suspicious transactions will be key elements in demonstrating institutional control. Once legislation is ratified, there will likely be a short runway for preparation prior to full implementation. As such, schools that delay the process of creating a monitoring infrastructure will be at a decided disadvantage once either state or NCAA legislation goes into effect. Taking these steps sooner rather than later will best position institutions for an effective transition.

Spry is a third party partner that will focus on helping institutions remain compliant with state and federal NIL legislation. By helping institutions set transparent, customized parameters for booster involvement, Athletic Departments and Spry can track and monitor each transaction. If you would like to schedule a demo with Spry, click here.

 

todd hairston2

About the Author

Todd Hairston

NCAA COMPLIANCE PROFESSIONAL WITH 20 YEARS OF CAMPUS EXPERIENCE

The Concern

When the concept of Name, Image and Likeness began to gain traction nationally, the reaction within the collegiate athletics community was mixed. While on one hand there was excitement about the new opportunities that would exist for student-athletes, coaches and administrators immediately grew concerned about how this new order would impact competitive balance. Specifically, would NIL provide pathways for outside parties (e.g. boosters) to influence the recruiting process by enticing recruits to attend certain institutions via illegitimate NIL transactions?

This issue of managing booster involvement continues to be of great concern within the membership. However, given the apparent inevitability of reform legislation around NIL, schools must now shift their focus to identifying ways they can protect against impermissible booster influences in the recruiting process.

The Dilemma

The lead up to NIL has been challenging in many respects. At present, it remains uncertain what the exact parameters of the legislation will look like or when it will be implemented. Further complicating matters, the NCAA’s normal legislative process has been impacted by various state laws and the possibility of additional involvement from the Supreme Court and Congress. Indecision at the national level has created a sense of paralysis for many institutions in terms of what they should be doing to plan for an uncertain future. While we are all eager to learn the details that will emerge once all of the legislative dust settles, institutions and athletic departments simply cannot afford to take a ‘wait and see’ approach. Institutions must be proactive. To that end, I’ve identified a few steps schools may want to consider in their preparation as we ramp up to NIL implementation.

Internal Communication

Most athletic departments already have efficient systems in place to communicate with, track, and segment their donor population. Oftentimes, however, these efforts are siloed within the Fundraising/Development arm of the department. With athletics compliance offices likely assuming the lion’s share of the monitoring responsibilities around NIL, it will be important for athletic departments to create systems and workflows that will allow for better sharing of information internally. This will be a critical step to ensure that boosters, particularly those who own businesses within the locale of the institution, are easily identifiable to compliance and that any booster related NIL transactions are properly disclosed and monitored.

Education

Education of boosters will be vital to a school’s ability to mitigate institutional risk. Since boosters function as representatives of an institution’s athletics interest, schools will have increased culpability for any violations involving boosters. Therefore, making sure these individuals are well educated on the boundaries that will exist within the NIL framework will be extremely important. While we don’t yet have the final draft of the legislation, we know that any financial transactions between boosters and student-athletes will need to result from legitimate business arrangements. Beginning the educational process with booster groups now will allow schools to be a step ahead once final legislation is implemented.

 

Read Part II of this Series > 

 

todd hairston2

About the Author

Todd Hairston

NCAA COMPLIANCE PROFESSIONAL WITH 20 YEARS OF CAMPUS EXPERIENCE

Since changing their rules to allow college athletes to be compensated for the use of their ‘name, image, and likeness’ (NIL) in 2019, the NCAA, (as well as Congress and Institutions) have been endeavoring to determine the bounds of this new ability. While allowing college athletes to profit off of their NIL, the NCAA is advocating for rules that ensure these students maintain their amateur status and do not become traditional employees. Many state and federal legislators, on the other hand, are advocating for rules that grant students and universities broad authority in seeking and forming these deals. Because the NCAA has not provided specific guidelines and is currently awaiting the Alston Supreme Court decision, determining whether the NCAA’s cap on education-related compensation for student athletes violates antitrust laws, many state legislators are presently drafting and enacting laws to protect college athletes in their states.

California first enacted legislation allowing college student-athletes to earn compensation for their NIL in 2019, but the law does not go into effect until January 1, 2023. Though following behind California, Florida’s similar legislation goes into effect in July of this year. Florida’s bill allows collegiate athletes to earn compensation for their NIL and prohibits schools from adopting any rules that prevent or unduly restrict an athlete from earning such compensation. The bill also guarantees athletes’ rights to securing an authorized agent and requires compensation to come from third parties, unaffiliated with the athlete’s school. Now, more than 20 similar state bills are pending.

Two main issues arise from this state-regulation approach. First, inconsistencies between states, and therefore institutions, will raise administrative costs for Athletic Departments. Athletic Directors, Compliance Officers, and other parties might be tasked with ensuring student-athletes adhere to regulations, so they can keep their eligibility. Second, some fear that students will be incentivized to attend particular schools based on their ability to retain an agent and earn compensation for their NIL. This may lead to some schools gaining an, arguably, unfair advantage based on the NIL legislation of their state. Therefore, the NCAA, and others, are advocating for federal NIL legislation to be passed. Multiple senators have introduced federal legislation.

Most recently, Senator Murphy (D-Conn.) introduced the “College Athletic Freedom Act.” This follows Senator Booker’s (D-NJ) bill which is said to be the most athlete-friendly NIL legislation. Some republican senators have also introduced NIL legislation, which is viewed as more NCAA-friendly. Proposed federal legislation must be followed closely, as it will greatly impact all member institutions throughout the U.S.

Under the Supremacy Clause of the U.S. Constitution, when conflict arises between state and federal laws, federal law preempts state law.

In some cases, Congress will preempt all state regulation in the area; in others, Congress allows state regulations that impose more stringent standards than those imposed by federal regulators. Therefore, the ways in which a state’s law conflicts with federal law must be determined. The NCAA is advocating for federal legislation that explicitly preempts all state legislation and establishes one set of rules to govern all college athletics. University Athletic Directors, Compliance Officers, and other parties involved will need to be aware of federal law, state laws, and NCAA rules. Deciding Alston and enacting federal legislation will inform the NCAA on how to draft its rules, and may limit any further state legislation, clarifying requirements for all interested parties.

In summary, although it is decided that student athletes can earn compensation for their NIL, the bounds of this ability are largely unknown. Different state legislation is being enacted, federal legislation is in the drafting stage, and NCAA rules will not be formed until after the Alston decision. Therefore, the rules and regulations surrounding students’ abilities to profit off their NIL are unclear, and in many respects, undecided. At this point, keeping track of all legislation being drafted and enacted, is integral to stay up-to-date and prepare to track students’ deals.

morgan povinelli

About the Author

Morgan Povinelli

J.D. CANDIDATE AT GEORGE WASHINGTON LAW SCHOOL

A New Normal

There has been much consternation over the changing landscape of NCAA legislation in recent months, particularly as it relates to NIL. Unfortunately, prolonged discussions by the NCAA, as well as various state legislatures and congress, have yielded more questions than answers. What we know is that the future will almost certainly look significantly different than the past in terms of how we define and treat amateurism in intercollegiate athletics. What we don’t yet know are the specific ways in which schools will need to adjust to these changes. What will the NCAA require from a monitoring and reporting standpoint? What will be the resource allocation to institutions, and perhaps most importantly, what will be the overall impact of this new order for less resourced athletic programs? For the purpose of this discussion, I am defining less resourced or those without football programs as all schools outside of the Power Five conferences.

Most discussions of college athletics revolve around the 65 schools that have membership in these five conferences, commonly known as the Power 5 – while acknowledging that the AAC has worked to establish itself as a worthy peer in recent years. However, the Power Five represent a relatively small percentage of the nearly 350 schools in Division I and 1300 NCAA institutions in total. As such, I’d like to explore some of the ways in which NIL might impact the vast majority of NCAA member institutions.

Do Lesser Resourced Programs Need to Worry About NIL?

In conversations with several of my colleagues at schools outside the Power 5, I have encountered what I believe are some common misconceptions about how NIL is likely to function once fully implemented. A common refrain has been, “We don’t have any NFL first rounders or NBA lottery picks so it really won’t be that much of an issue for us.” This view, however, assumes that only elite athletes will benefit from NIL. The reality, even for Power 5 schools, is that very few student-athletes will attain elite status such that they will garner interest for endorsement opportunities at a national level. What is far more likely, however, is that a number of athletes will achieve “local celebrity” status within their school communities and will be attractive endorsement targets for commercial entities such as car dealerships, corner stores and mom and pop establishments. Additionally, thousands of student-athletes in all sports are eager to monetize their “expert” status by running camps and clinics, producing instructional content as well as other sports related entrepreneurial ventures. These types of opportunities will likely comprise the vast majority of NIL transactions and will most certainly not be limited to student-athletes at Power 5 institutions. In my opinion, it would benefit every NCAA school to begin preparing for how they will respond to a post-NIL environment as it will have a profound impact on how athletic departments at all levels will need to conduct business going forward.

Personnel and Resource Issues

The current version of the NCAA’s proposed legislation indicates that there will be some requirement for institutions to monitor NIL transactions for their student-athletes. Additionally, there is also an expectation that schools will provide at least a baseline level of education around NIL issues. The lion’s share of these responsibilities will presumably fall on compliance offices, which at lesser resourced programs, range anywhere from 1-3 full-time staff members. Adding these duties to the task list of compliance units that are already understaffed is problematic. Even more concerning is the fact that adding personnel is simply not feasible from a budgetary standpoint for many institutions. Some athletic departments have even explored the possibility of enlisting their professional schools (e.g. business schools, law schools) to assist with the educational component and the vetting of NIL opportunities. While this an extremely logical approach, it is likely not a very practical one. Given the volume of NIL activity that is likely to exist on most campuses, it doesn’t seem realistic that these campus partners will be able to absorb this vast responsibility into their queue.

Third Party Management Solutions

Many schools have explored the prospect of third party management tools as a potential solution to these issues. While this is a likely course of action for larger athletic programs, it is perhaps an even more necessary approach for lesser resourced programs due to their limited opportunities for staff expansion. Spry’s digital platform will provide a streamlined approach to managing NIL transactions, disclosures and processing of third-party payments at a fraction of the cost of hiring an additional staff member. Spry will also be an invaluable resource for compliance staffs by enabling them to flag questionable transactions and potential impermissible involvement from donors. With personnel and resources at a premium for many institutions, Spry is the ideal too to allow athletic departments to work smarter and not harder while doing more with less.

todd hairston2

About the Author

Todd Hairston

COMPLIANCE EXPERT WITH OVER 20 YEARS OF EXPERIENCE

Complexities of NIL

Name, Image and Likeness, how does an Athletic Department begin to address the complex changes that will occur when Legislation is live? The shift in decades old NCAA policy will affect Universities and Student Athletes on every level. As Institutions plan for the future, the responsibility of overseeing these new opportunities will primarily fall directly on the desks of Athletic Directors and Compliance Staff. Athletic Departments that are forward thinking and pivot early will have the most success in a seamless transition to communicate and guide Student Athletes. This is our focus at Spry. We believe it’s important to prepare Student Athletes and Athletic Departments with the tools necessary to be successful in the new era of NIL.

The complexities of NIL have been voiced by ADs across the country. Rising to the top of the list of challenges are:

  • Institutional vs. Individual Sponsor conflicts
  • Student Athlete Compliance – time management, NCAA limits
  • Approvals for Student Athlete opportunities – how does this process work
  • Education: How do we education our Student Athletes

Institutional / Ethical Conflicts

Athletic Departments of all sizes rely on sponsor dollars for the success of their programs. Conflicts between school sponsorship and individual sponsorship opportunities are a large concern regarding NIL. The ability to identify relationships between existing university contracts and collegiate-athlete opportunities and quickly/efficiently approve or deny incoming requests will allow Athletic Departments to navigate this new territory. Spry believes that a transparent environment for Student Athletes and compliance staff to communicate is critical to the success of moving forward with NIL.

Student Athlete Compliance

What limitations will be set by the NCAA and then passed to the University Athletic Departments to enforce? With Spry, Athletic Departments and Student Athletes will know that they are compliant with the rules. Spry provides peace of mind for Students Athletes so they can focus on the things that matter. Depending on the restrictions in place at each Institution, Spry will set approval parameters within our custom platform. (Limits may be different based on D1,D2, D3 or NAIS standards.) Using Spry’s mobile application, Student-Athletes can easily learn about the NIL rules and regulations while University/Athletic Departments provide the necessary support so all parties remain compliant and more importantly eligible.

Approvals

Great news, a Student Athlete has received an opportunity to capitalize on their name, image or likeness. Now what? First, the Student Athlete can use Spry’s Fair Market Value calculator to determine if they are being offered an equitable opportunity . If the Student Athlete is comfortable with the terms of the deal they can proceed through the disclosure and approval process. Through specific, thoughtful programming, the Spry platform will intuitively consider any NCAA and Institution conflicts – such as working with a tobacco company – and send an alert to the Institution’s compliance office. Thus Spry can ensure that Student Athletes and Institutions will remain within NCAA and Institution parameters.

Student Athlete Education

Spry is an innovative platform that can address the burdens that will be placed on Athletic Departments as new rules are put into place. The platform at Spry was developed with the Student Athlete in mind, educating Student Athletes through targeted classes, webinars and tailored programming will give Institutions the peace of mind that their educational content is easily accessible. Athletic Departments will have the ability to send their modules to student-athletes using Spry’s mobile app. With the help of industry experts, we’ve created a database of cohesive education assets to ensure success. Compliance staff will start the NIL conversations within the Athletic Department and have the opportunity to thoughtfully guide Student Athletes through new regulations.

Conclusion

The opportunities that will result from NIL Legislation are endless. Student Athletes, Institutions and businesses who see the value in NCAA athletes will see exciting benefits as the NCAA moves forward with implementing NIL. The first few years of these new partnerships and deals will set the foundation for how each Institution is recognized in the NIL conversation. The Spry platform will ease the growing pains for Athletic Departments, allowing Student Athletes to celebrate their new opportunities.

sarah knysh

About the Author

Sarah Knysh

SPORTS MARKETING EXPERT WITH OVER 17 YEARS OF EXPERIENCE