This month, a judge approved a $2.8-billion settlement that will reshape college sports. The agreement, known colloquially as the House settlement, will create millions in new expenses for dozens of athletic departments by allowing colleges to pay players and removing limits to scholarships that campuses can award.
Effective July 1, colleges will for the first time share revenue with their athletes and make payments for the right to use their names, images, and likeness. The $20.5-million cap on payments to athletes will go up each year for the 10 years that the settlement is in effect. The removal of the scholarship cap will also add several million to the expense column for the most competitive athletic programs.
Where athletic departments will find the money to cover the new costs is starting to become clear. Some are turning to subsidies from campus.
While smaller campuses will certainly also feel the financial pressure, it’s the larger athletic programs that are producing eye-popping numbers. The University of Kentucky will lend its athletic department up to $141 million over the next few years; the University of Missouri announced in January, in anticipation of the settlement, that it would give $25 million to its athletics department in addition to a $15-million loan.
Michigan State University’s 2025-2026 operating budget includes a line for an “internal loan” of $12.1 million in athletics revenue. A footnote in the budget document says: “The initial year following the approval of the House settlement results in a deficit until new media rights and sponsorship revenues increase in FY27. The deficit will be covered with an internal loan to be repaid by Athletics.”
Some of the most lucrative athletics programs give money to their campuses, rather than the other way around. The University of Michigan’s athletic department will continue to do so, but next year it will reduce the amount of TV revenue it allocates to the university from $8 million to $2 million, according to a campus message from Warde Manuel, the athletic director. The athletic department will also cut staff by 10 percent through attrition and implement “a stricter approval process for new hires.” An athletics-department spokesperson declined to comment further.
Several campuses have announced plans to cover expenses related to the House settlement by charging students more. West Virginia University will add a student fee of $125 per semester for athletics. The athletics department will also see “enhanced University support,” spokesperson Shauna Johnson said in an email. (Johnson declined to say how much the department will raise as a result of the student fee or say how much money will flow from the campus to the department.)
The Kansas Board of Regents approved a tuition increase at universities across the state. In its request for a 3.5-percent tuition increase, Wichita State University cited the settlement, saying it will have a “significant impact” on the athletics department.
Kentucky’s loan to its athletics department stands out for its size. Jay Blanton, the university’s associate vice president and chief communications officer, said athletics would pay the university back with 4.5 percent interest. The first phase of the loan will go toward renovating and improving facilities, according to a campus communication. Another $31 million will go toward new expenses that come as a result of the House settlement, including $20.5 million for athletics and additional scholarships that are now allowed under the terms of the deal. That money will also cover the increased cost of athletes’ travel and lodging.
Kentucky’s athletics department will spin off into a separate nonprofit holding company, the university announced. The new organization will have a board of seven voting members who meet monthly and will be able to advise the athletic department on how to find new sources of revenue. The move will allow the department to more easily do things like invest in real estate, build out an entertainment area with restaurants and hotels, and partner with private companies, Blanton said.
The new entity will still report to the University of Kentucky Board of Trustees. It’s similar to how the university has handled recent acquisitions of two hospitals in Kentucky, according to communications about the effor, which exist in nonprofit shell companies that allow them to have compensation structures and policies different from the university.
Jennifer Cramer, a linguistics professor and president of Kentucky’s American Association of University Professors chapter, said she appreciated that the loan the university is making to athletics would not only be for revenue sharing but would advance the whole enterprise. As a native Kentuckian and a graduate of the university who joked that her first words were “go big blue,” she said she understood the importance of athletics to the institution.
But amid historic cuts in federal funding to research and the general headwinds higher education is facing, faculty members are growing concerned. (The faculty voted no confidence in the university’s president, Eli Capilouto, last year after he proposed dissolving the Faculty Senate, among other changes.)
“The size and scale of this proposed loan to athletics has made us kind of stop and think: Can we match that level of enthusiasm,” she wondered, “for our core academic mission?”
Karen Weaver, who teaches about higher education and college sports at the University of Pennsylvania, said colleges are going to be looking for new ways of structuring athletics departments as they figure out how to pay athletes. Creating an LLC, she said, “is a bit of a different take on how to process payments, how to organize different contractual relationships than the typical university-employee relationship.”
Subsidizing athletics through the main campus is nothing new. Some campuses have long relied on growing student fees to prop up programs, and a Chronicle analysis found in 2016 that campus subsidies far outweighed money that flowed in the other direction.
