College Sports Enter New Era as Schools Begin Direct Payments to Athletes


The NCAA and its Power 5 conferences agreed this week to a legal settlement that could allow for schools to pay athletes directly. Ezra Shaw/Getty Images

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	Starting this fall, NCAA Division I schools will be able to pay players directly up to a salary cap of $20.5 million. (Jae C. Hong/AP)
	College Sports Enter New Era as Schools Begin Direct Payments to Athletes Historic $2.8 billion settlement ends century-old amateur model Justin Tyme - Sports Dustin Schoenherr - Sports Tell Us USA News Network DETROIT - For the first time in NCAA history, college athletes across the country are now eligible to receive direct payments from their schools, marking the end of the traditional amateur model that has defined college sports for over a century. The transformation began July 1, following federal court approval of a landmark $2.8 billion legal settlement that resolved years of litigation challenging the NCAA's restrictions on athlete compensation. Schools can now distribute up to $20.5 million annually to their student-athletes through a new revenue-sharing system. "This is the most significant change in college athletics in our lifetime," said Mark Thompson, athletic director at State University, whose program announced it would pay out the full allowable amount. "We're entering completely uncharted territory." The settlement, approved by a federal judge on June 6, stems from the House v. NCAA class-action lawsuit that argued the organization's compensation restrictions violated antitrust laws. Under the agreement, the NCAA and participating schools will pay $2.75 billion to former college athletes who competed before 2021, when name, image, and likeness (NIL) rules first allowed athletes to earn endorsement money. Major Conferences Commit Full Funding Schools in the Big 12, Big Ten, and SEC have all confirmed they will distribute the maximum $20.5 million available for the 2025-26 academic year. The payment cap increases annually throughout the 10-year agreement, reaching a projected $32.9 million by 2034-35. "Our commitment is to provide every opportunity for our student-athletes to benefit from this new landscape," said Sarah Martinez, commissioner of the Atlantic Coast Conference. "This represents a fundamental shift in how we support our athletes." The payments are not mandatory, allowing schools discretion in determining how much to distribute and which athletes receive compensation. However, early indications suggest most major programs plan to utilize the full allowable amount to remain competitive in recruiting. Implementation Challenges The rollout has required significant administrative adjustments. All participating institutions must use the newly implemented College Athletics Payment System (CAPS) to allocate funds, monitor payments, and ensure compliance with roster-based regulations. Athletes receiving direct payments face new tax obligations, with revenue sharing treated as self-employment income and reported via Form 1099-MISC. Many programs are providing financial literacy education to help athletes navigate these responsibilities. "We're not just changing how we pay athletes, we're changing how we educate them about money management and taxes," explained Dr. Jennifer Walsh, compliance director at Midwest University. "It's a complete paradigm shift." Industry Transformation The move represents the culmination of mounting pressure on the NCAA's amateur model, which faced increasing legal challenges and criticism from athletes' rights advocates. The settlement comes as college sports generate billions in revenue through television contracts, ticket sales, and merchandise. Student-athletes have long argued they deserved a share of the profits generated by their athletic performances, particularly as coaches and administrators earned substantial salaries. The new system acknowledges their contribution to the enterprise while maintaining their status as students. "This is about fairness and recognizing the value these athletes bring to their institutions," said Michael Rodriguez, executive director of the College Athletes Rights Coalition. "It's long overdue." Looking Forward As the first week of direct payments concludes, athletic departments are closely monitoring the impact on recruiting, team dynamics, and competitive balance. The NCAA continues to work with schools on implementation guidelines and compliance standards. The settlement also includes provisions for ongoing oversight and potential adjustments as the system evolves. Industry observers expect continued refinement of the revenue-sharing model as both schools and athletes adapt to this new reality. For current college athletes like University of Michigan basketball player Alex Johnson, the change represents both opportunity and responsibility. "It's exciting to be part of this historic moment," Johnson said. "We understand we're setting the precedent for future generations of student-athletes." The transformation of college athletics continues to unfold as schools, athletes, and fans adjust to a landscape where the century-old principle of amateurism has given way to direct compensation for on-field performance. Additional reporting contributed by staff writers.