Why college athletes should ‘live like college students’ despite six-figure NIL deals

College football season is kicking off and some young athletes taking the field around the country will be seeing an influx of income from name, image and likeness (NIL) and revenue sharing deals, which can pose financial challenges as they look to manage those funds.

NIL first took hold in college sports in 2021 and monetary compensation for student athletes recently evolved to include revenue sharing directly with the colleges they’re playing for. For some players, they may earn six- or seven-figures in income through those deals – particularly at colleges in the power four (P4) conferences, including the Big Ten, SEC, ACC and Big 12 or for players competing in college football and basketball.

Gordon Whittaker, a wealth management advisor and managing director at Merrill Lynch, told FOX Business that whether student athletes are likely to play professionally after their college careers end, it gives them the chance to build financial habits and a foundation that can serve as a springboard for their futures.

“The earlier you can establish financial habits… the more likely that it is to be effective and the more likely it is to stick. And so extending that period of time and giving the opportunity for these young men and women to earn money earlier in their careers, earlier in their lives, expands that opportunity to start to really build those financial habits,” he said.

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“The majority of the conversations that we’re having with these young people is about being a good steward of those funds and building those positive financial habits,” Whittaker said.

He said that while college athletes are in school, “their budget ought to be very small in terms of what they need to spend. Whether they’re a star player on a P4 football team or they’re a backup on a second- or third-tier school, they don’t have a lot of ongoing expenses, so anything they receive ought to be at an incremental savings rate.”

“We just encourage them to live like college students and retain those assets, start to own assets and allow that force of compound interest to take effect over the next several decades,” Whittaker said. “Even small dollar amounts turn into massive dollar amounts if given enough time.”

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One area that Whittaker said advisors are trying to instill in college athletes is the importance of understanding that if they’re fortunate enough to play their sport professionally, they need to save money to account for the fact that they’ll need to support themselves after their playing career eventually comes to an end.

“We spend a lot of time talking about this idea of being an owner versus being an employee and what wealth really looks like,” he added. “What we really approach is to shift that mindset away from equaling wealth, towards owning assets equaling wealth.”

“You’re not going to work until you’re 65, or at least not in this capacity, and so every dollar that you make – 10 cents of that may be today, 90 cents of that is to make up that gap when you stop in your primary profession,” Whittaker said.

“Having those conversations and really imploring the importance of delaying gratification has been very important,” he added, noting that it’s helpful for athletes to look at professional athletes who are being good stewards of their funds with an ownership mentality.

Earning income from NIL and revenue sharing means that players also owe taxes, which Whittaker noted was a stumbling block in the earlier days of NIL, as some didn’t understand that 1099 income hasn’t been withheld like W-2 income would. He said that a lot of collegiate programs have begun helping the athletes split their income to account for their tax bill.

“That has been popularized enough now where we don’t come across people who have no idea that they have to do some tax planning when they receive the funds very often anymore, which is definitely a good thing,” Whittaker explained.

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The shifts in student athlete compensation also present a new question for student athletes who are capable of playing professionally, as they have to weigh what they would earn in pro sports versus the opportunity to stay in college and earn more while they still have eligibility.

Whittaker said that the question used to be “are you going to improve your draft status enough by sticking around for it to warrant delaying income for a year?” Now, the current income flows are considered in that process.

Student athletes who are hoping to bolster their earning potential via NIL or revenue sharing while they’re in college also need to be mindful of how they’re presenting themselves and building their brand.

“This may be a message to those that are looking to NIL and looking to play a sport in college, the most important thing to keep in mind is you are your own brand, particularly as it relates to NIL. And the decisions you make off the field directly impact how you’re compensated,” Whittaker said.

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“There’s a significant amount of responsibility that comes with notoriety and being purposeful and understanding that your actions, every minute of every day, impact your monetization,” he added.

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