Following the completion of the House v. NCAA settlement, starting from July 1, 2025, college athletes will gain a portion of the income they play a role in generating. Amidst the landmark ruling, athletic institutions can distribute up to $20.5 million annually to athletes, along with billions in retroactive name, image, and likeness (NIL) payments.
This new compensation strategy allows student-athletes an opportunity to enhance their long-term personal and professional development. Particularly for those lacking wealth management experience, there is now an impetus to build wise, long-term investment strategies.
Over the coming decade, the settlement will distribute approximately $2.78 billion in damages to qualified current and former student-athletes. The settlement administrator, led by the House class counsel, will handle these payments. Annual equal payments will be given to athletes. However, the amount given will fluctuate according to various factors, such as the sport, the period of competition, and available scholarships.
For existing athletes at participating ACC, Big Ten, Big 12, Pac-12, and SEC institutions, their payments will be arranged and reported via the College Athlete Payment System (CAPS). CAPS is designed to help schools allocate funds to student-athletes, oversee payments and progress against the cap, ensure compliance, and monitor roster allocations.
In the academic year 2025 - 2026, each school will have a cap of $20.5 million. However, this figure is projected to raise by 4% annually over the next two years and will be reassessed every three years throughout the decade-long settlement period.
Before diving headfirst into investments, student-athletes are advised to concentrate on financial education. Building enduring wealth begins with understanding the basics, setting clear goals, and having a precise investment plan. A financial advisor, preferably fee-based, can provide valuable assistance in creating a plan tailored to the unique needs and goals of the individual athlete.
A Roth IRA is a particularly effective way of creating long-term wealth, given the income requirements are met. For athletes unable to contribute to a Roth IRA due to the income limits or for those who have already maxed out their Roth IRA contributions, a taxable brokerage account can be of help. It has no contribution limits or withdrawal penalties and allows access to funds at any time.
Focusing a brokerage account on diversified, low-cost index funds or ETFs reduces risks and fees, captures long-term market growth, and eliminates the stress of choosing individual stocks. Establishing a budget is also recommended to prevent overspending and control finances, and promote good financial habits.