NCAA Student-Athlete Settlement Whips Up Brewing Funding Storm

Colleges and universities are bracing for a perfect storm of financial challenges. The convergence of three significant events—the approaching enrollment cliff, looming federal funding cuts, and potential reductions in international student tuition—could fundamentally alter the landscape of higher education finance.

At the same time, the NCAA and member institutions are preparing to comply with a legal settlement that allows schools to share revenue with college athletes directly, a move that could reshape the economics of college sports.

The recent House v. NCAA antitrust settlement, which includes a payout of $2.7 billion for past damages and a new revenue-sharing model for future athlete compensation, opens the door for schools to pay athletes directly. While advocates hail the move as a long-overdue recognition of the labor of athletes that generates billions of dollars annually for athletic conferences and the NCAA, schools now face a dual threat: rising costs tied to athlete compensation and shrinking revenue streams from demographic and political headwinds.

The Enrollment Cliff

An immediate financial threat to higher education is the so-called “enrollment cliff.” Driven largely by declining birth rates after the 2008 recession, the number of college-aged students is projected to plummet following a peak this year.

The population of high school graduates in the US is expected to decline by 10% to 15% through the early 2030s and, after a slight uptick, result in 13% fewer students by 2041. Compounding this demographic phenomenon is a cultural one, as more students and parents question the value of a college degree, especially if the cost is oppressive student loans and decades of debt.

This demographic contraction will hit public universities and small private colleges, which often rely heavily on tuition revenue and lack the massive endowments, hardest. Fewer students mean fewer tuition dollars, potentially triggering layoffs, program cuts, and increased competition for a shrinking pool of applicants.

For athletic departments, this drop in enrollment doesn’t just affect the general budget; it also reduces the pool of potential student-athletes. Universities may also struggle to justify maintaining large, non-revenue-generating athletic programs when the broader institution is making painful cuts.

Shrinking Federal Support

Compounding the enrollment cliff is the threat of reduced federal funding. While federal support for research and student aid historically has been significant, political influences and calls for austerity could limit future allocations.

The pandemic-era surge in federal support is over, and many colleges now face “funding cliffs” as those temporary dollars run out. Public universities that rely on state support face even greater challenges as funding for programs such as Medicaid shift from the federal government to the states, stressing already burdened state budgets and forcing schools to compete for limited public funds.

Further, proposals to reduce Pell Grants and limit student loan forgiveness programs would shift more financial burden to students and families, making college less accessible and likely reducing enrollment even further. Public institutions, especially those dependent on state and federal funding, will find themselves squeezed from both ends.

This budget pressure could make it difficult for colleges to meet the new financial obligations arising from athlete revenue sharing, particularly as costs increase across campus and political support for higher education spending continues to erode.

Vulnerable Revenue Streams

International students have long been a critical source of revenue for American universities. These students typically pay full tuition—often at out-of-state or international rates—and require less financial aid. During the 2023-2024 academic year, more than one million international students studied in the US, contributing an estimated $43.8 billion to the economy and supported 378,000 jobs.

But the pipeline of international students is fragile. Geopolitical tensions, visa restrictions, rising global competition from countries such as Canada and the UK, and growing concerns about campus safety have all contributed to a slowdown in international student enrollment. Should these trends continue, schools could lose a major source of tuition revenue just as athlete compensation becomes a budgetary necessity.

For many institutions, particularly those outside of the Power Five conferences, the financial strain from losing international tuition dollars could make competitive participation in Division I athletics extremely difficult under the new revenue-sharing model.

The House Settlement

The House settlement represents a fundamental shift in college athletics. The case challenged the NCAA’s restrictions on athlete compensation under antitrust law.

As part of the settlement approved in June, schools will be allowed—but not required—to share up to $20 million annually with athletes from tickets sales, university sponsors, media rights deals, and other revenue sources. Most of that money is earmarked for revenue-generating sports such as football and men’s and women’s basketball.

While the settlement is a win for athletes’ rights, it presents a major financial challenge for colleges. Only a small number of athletic departments—roughly 20 to 25, mostly at large Power Five schools—operate in the black. The rest rely on subsidies from student fees, institutional support, and public funding to stay afloat.

For non-elite programs, the prospect of sharing millions in revenue with athletes could prompt difficult decisions: cutting non-revenue sports, downgrading to lower divisions, or eliminating intercollegiate athletics altogether.

The convergence of financial pressures forces a reckoning for colleges trying to balance the need to compensate athletes fairly while addressing their broader financial challenges.

One possible outcome is increased stratification. Wealthier institutions with large TV deals, strong donor bases, and major conference affiliations can pay athletes, compete at a high level, and maintain a robust athletics infrastructure. Meanwhile, less-resourced schools may scale back or refocus their missions, shifting away from expensive Division I sports in favor of academics or lower-cost athletic programs.

Another possibility is private equity investment and greater reliance on university donors and commercial sponsorships to subsidize athlete pay. Yet this introduces new risks: further commercialization of college sports, increased legal exposure, and growing tension between athletics and academic values.

Colleges and universities are entering a period of extraordinary transformation. As demographic decline, funding uncertainty, and global competition reshape the economics of higher education, institutions must now also contend with the legal obligation to compensate athletes more fairly.

The House settlement is a landmark step toward equity in college sports, but it arrives at a precarious time for higher education. Whether institutions adapt, consolidate, or collapse under the weight of these converging pressures remains to be seen. What is clear is that the next decade will be critical in determining not only the future of college athletics—but the future of American higher education itself.

The case is House v. NCAA, N.D. Cal., 717, decided 7/6/25.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Kenneth A. Jacobsen is a practice professor at Temple University Beasley School of Law, and his previous private practice concentrated on complex civil litigation, including class actions and mass torts.

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