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A New Era in College Sports: Federal Judge Approves Landmark Settlement Allowing Direct Pay to Student-Athletes

Posted by Paul Saluja | Jun 07, 2025

In a historic ruling, a federal judge has approved the multibillion-dollar class-action settlement known as House v. NCAA, ushering in what may be the most significant transformation of college athletics in a generation.

Beginning this fall, institutions in the NCAA's top division will be allowed to pay student-athletes directly—a dramatic departure from the long-standing amateurism model that barred players from receiving compensation beyond scholarships and cost-of-attendance stipends. The new compensation structure will be governed by a salary cap, initially set at $20.5 million per school. In addition, more than $2.7 billion will be distributed to former student-athletes who competed prior to 2021, the year the NCAA first permitted name, image, and likeness (NIL) earnings.

This settlement brings long-awaited recognition of the value that college athletes contribute to a multibillion-dollar industry. For decades, major athletic programs reaped enormous revenue from television contracts, ticket sales, and sponsorship deals, while players remained uncompensated for their labor. The legal challenge that culminated in this decision consolidated three separate lawsuits brought by a class of nearly 400,000 current and former athletes.

What the Settlement Means Moving Forward

The settlement creates a dual framework: one addressing past injustices and the other establishing new rules for future compensation.

  • Back Pay: The NCAA and major conferences will collectively pay $2.75 billion to former athletes who played before the NIL policy shift in 2021. Payments will be tiered based on sport, prominence, and school, with football and men's basketball athletes likely receiving the largest sums.

  • Direct Compensation: For the first time, universities will be able to directly compensate athletes. Schools can determine which athletes to pay and how much to offer, provided that total payments across all sports remain within the salary cap, which could increase to $33 million by 2035. Scholarships remain uncapped, but new roster size limits will apply to team construction.

  • NIL Oversight: The agreement also introduces a third-party clearinghouse designed to ensure that NIL licensing agreements reflect “fair market value.” While this aims to prevent abuses of NIL as a proxy for recruiting incentives, it has drawn criticism and may be vulnerable to legal challenge.

Participation Among Institutions

Approximately half of the NCAA's 365 Division I schools are expected to adopt the new model. Many will be required to do so based on their inclusion in the litigation, while others are likely to opt in voluntarily. Schools in smaller conferences or those without high-revenue sports may choose to continue compensating athletes solely through scholarships and other education-related benefits.

Implications for the Future of College Sports

This watershed moment solidifies the end of the NCAA's amateurism doctrine and acknowledges the economic realities of modern collegiate athletics. While this ruling provides overdue restitution to thousands of former athletes, it also opens the door to a new competitive and legal landscape—one where schools must navigate salary caps, NIL valuations, and potential challenges to the new system's legality.

At Saluja Law, we continue to monitor and advise on the legal and regulatory developments affecting athletes, schools, and the broader sports industry. This decision marks the beginning of a new era—one that demands vigilance, compliance, and advocacy to ensure fairness and opportunity in collegiate athletics.

For questions about how this decision may affect your rights or your institution, contact Saluja Law for a consultation.

About the Author

Paul Saluja

Paul Saluja is a distinguished legal professional with over two decades of experience serving clients across a spectrum of legal domains. Graduating from West Virginia State University in 1988 with a bachelor's degree in chemistry, he continued his academic journey at Ohio Northern University, gr...

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