The long-standing battle between athletes and the National Collegiate Athletic Association (NCAA) has finally come to an attractive resolution.
College athletes can finally start earning from NIL endorsements, according to the recent changes made to NCAA policies.
Universities and major sports brands across the nation are now rushing to understand what these changes mean for them and their organizations. Meanwhile, athletes are also curious to know just how the new NIL rules can benefit them.
If you’re having trouble understanding NIL compensation for college athletes, this guide is for you.
What Exactly Is NIL?
NIL technically stands for name, image, and likeness. It’s a term used to refer to the money an athlete can earn from NIL endorsements and marketing campaigns. As of July 2021, the NCAA has approved student-athletes to monetize their NILs.
NIL rules and restrictions vary between states and institutions. Before entering into any agreements, make sure you read and understand the restrictions in your state and school.
How Are College Athletes Being Compensated for NIL?
NILs come in various forms. The amount that an athlete can earn from their NILs will depend on the type of agreement they have.
Here’s how college athletes are being compensated for NIL:
- Through free or sponsored products and services
- Through affiliate money from social media promotions
- Through direct payments in exchange for promotional services
- Through direct payments for appearing in autograph-signing events and other corporate activities
- Through free or sponsored professional training clinics
- Through FTX exchange payouts
Nearly half a million college athletes across the nation are earning NIL money by working with local businesses on promotions. Many have found work with large sporting brands such as Nike, Under Armour, and Adidas.
A few examples are Caitlin Clark, Haley Jones, and JuJu Watkins — all of whom have recently been added to Nike's student-athletes roster.
Still, the fastest and possibly easiest way college athletes can make money from NIL is through social media affiliate marketing. Even micro-influencers with fewer than 10,000 followers on social media, can profit from their followers.
The micro-influencer trend has gained popularity because when you get people with smaller followings to promote a service or produce, the things they suggest appear more genuine.
Posting sponsored content can earn you hundreds or even thousands of dollars per month, depending on the size of your following.
How Much Can Athletes Make from NIL?
The earning potential of athletes when it comes to NIL varies. Power Five schools typically have student-athletes who make life-changing incomes with each deal they accept. However, for the majority of the country's players, the monetary benefits are more helpful with day-to-day expenses.
This contrast is due to several factors, including the sport you play, your success potential, and your social media following.
Here’s a quick example to put things into perspective: A quarterback like Bryce Young has an earning potential of $1 million per NIL endorsement.
He has over 200,000 active Instagram followers — not to mention one of the most impressive stats on the scoreboards today. His high earning potential is a result of his popularity and excellent athletic performance.
Athletes with no more than a couple of thousand followers and who only possess mediocre athletic prowess can’t expect to make as much NIL income.
According to Opendorse, a NIL market platform, the average earning of college athletes for NIL agreements can range from $437 to $4, 923 per agreement.
Is NIL Money Taxable?
As with any income, there are several tax implications to consider once you begin generating income from NIL endorsements. NIL income is taxed as self-employed income.
If you make over $600 for each deal you accept, you’ll need to fill out a form 1099 with the company that hired you.
Since NIL deals are considered a form of self-employment, self-employment tax must be paid. For the first $140,000 earned, your overall tax costs may range between 12-15%.
Besides self-employment taxes, you might also be subject to taxes in your home state, as well as the state you earned your income.
For instance, if you’re from New York and are hired by a brand from Texas for a marketing campaign, you’ll have to pay taxes in both New York and Texas.
Additionally, if your income exceeds $12, 550, you may also be subject to federal tax.
How to Maximize Your NIL Earnings
There are several things you can do to increase your NIL earnings.
A few examples are:
Read the Contract
It’s important to read your NIL endorsement contract before finalizing any deals. This is because some companies leverage NIL deals as vehicles to recruit students to a specific institution.
An athlete must perform some type of service in exchange for compensation for a NIL contract to be considered legal by the NCAA.
While the NCAA Division I Board of Directors stated emphatically that they don't intend to penalize athletes who have already signed NIL contracts, athletes would be wise to stay away from any future trouble.
Read your contract, make sure it's in line with recent NCAA guidelines, and avoid paying expensive charges resulting from non-compliance.
Know Your Worth
You can’t expect to land a deal of a lifetime without knowing your worth as an athlete. If you’re planning to make bank with NIL endorsements, you must have a sports manager or contract attorney to help you with transactions.
A seasoned attorney can strike a good NIL deal for the athlete, ensuring they secure the most money while also limiting any constraints that could interfere with the athlete's sport.
Additionally, a lawyer can help analyze contracts for pitfalls and loopholes. They may also help you determine the best contract length for a certain project.
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Predicting how much student-athletes will be able to earn with NIL in the coming years is impossible. Regardless, reports do point toward the possibility of athletes earning substantial amounts of money from NIL deals.
In other words, college athletics programs may have a new and lucrative frontier of revenue opportunities to explore sooner or later.
