How student athlete salaries are changing college sports

The new club seats come with an all-inclusive, rotating assortment of crab cakes, smoked ribs, cobb salad and macaroons, plus beer and wine. More than 40 private suites overlook the pristine football field, surrounded by lighting towers designed to look like wheat waving in the wind. 

This isn't an NFL venue. It's the David Booth Kansas Memorial Stadium, home to the University of Kansas Jayhawks and the site of an ongoing roughly $800 million renovation that includes an adjacent entertainment district.

The new luxury seats and swanky amenities show how the new financial model in college sports looks a lot more like professional teams. With universities now paying players a cut of their revenue, the race is on to generate more money to stay competitive. Big-time college towns such as Norman, Oklahoma, and Knoxville, Tennessee, are dotted with construction equipment as they build fancier football and basketball arenas with premium offerings, often surrounded by restaurants, apartments and hotels. 

The biggest college sports conferences agreed last year to a revenue-sharing plan with players, which amounts to about $21.6 million per school for athletes across all sports for the 2026-27 academic year. The figure is expected to increase 4% each year — but could effectively more than double if a new bill passes through Congress.

In addition to paying players, other expenses have been rising by millions of dollars each year, including pay for coaches and staff, said Roger Noll, an economist at Stanford University.

"Schools do not want to finance this entirely from their general budgets," said Noll, co-author of Sports, Jobs, and Taxes: The Economic Impact of Sports Teams and Stadiums. "The sweet spot for everyone is to find new revenue sources."

A key source of revenue growth: stadiums, arenas and the surrounding land. Fancier facilities can command higher ticket prices and more spending on concessions, plus they can host concerts and other events beyond seasonal games. Nearby areas can be developed into paid parking or be used for restaurants and hotels that pay leases to the colleges and help drive more consumer spending.

It comes with challenges. First, colleges have to find the money for development. The University of Tennessee turned to private equity, while Kansas sought funds from alumnus David Booth, one of the biggest names in finance. He agreed to contribute $300 million.

"Kansas has been very fortunate in that they've always had a great basketball team. Their football team has gone through a little bit of a dry spell until recently," Booth, founder of Dimensional Fund Advisors, said in an interview. "The athletic department came up with the idea that in order to get really competitive again, we're going to have to have a new football stadium, and I bought into the argument."

The starting level to get access to a suite at the Kansas stadium requires an $800,000 donation, plus $60,000 annually for the suite.

Another hurdle is that local communities aren't always on board, and the projects often take years. Then there's the alumni. 

Nowhere is the tension more apparent than at the University of North Carolina at Chapel Hill, where the new financial reality of college sports is colliding with tradition. The university came up with a plan to move its championship-winning men's basketball team from the Dean E. Smith Center and build an arena off campus. It would be part of a new development to accommodate expected growth of 5,000 students, research facilities, restaurants and entertainment space, the largest new development since the first cornerstone was laid at the school in 1793.

Administrators said the Dean Dome was aging and the new arena would make millions more in revenue each year. The backlash from former players, students, alumni and even former coach Roy Williams was fierce. The university has put the decision on hold.

Williams, who retired in 2021, advocates for renovating the 40-year-old Dean Dome. He worries the university is motivated by money, rather than what's best for the team.

"There are new stresses. There are new types of pressure," Williams said in an interview. "Is a new arena going to take that pressure away? They haven't proven that we're going to make X number of more dollars."

The one thing that can't happen is the status quo, said Chancellor Lee Roberts: "We put buckets out when it rains," he said in a June interview.

Rising costs

Even before they started paying players, college athletic departments were spending more than they generated in revenue, according to a report released in August from the U.S. Government Accountability Office.

Division I athletic programs spent $20.8 billion combined in the 2023-2024 academic year on game expenses like travel and equipment, medical care, scholarships and compensation for coaches and staff. According to the GAO, 94% of those programs spent more than they made. Among the so-called Power colleges — those in the most competitive D1 conferences — the median deficit was $15.2 million, compared with a gap of $2.7 million almost a decade earlier.

Most D1 colleges contributed substantial funding to support their athletic departments, the report found, funded by tuition and fees paid by students, as well as unrestricted funds.

After decades of resisting paying players directly, schools last year began revenue sharing following a Supreme Court settlement. But separate deals for players to benefit from their name, image and likeness (NIL) with third parties have proved chaotic and nearly rendered the "cap" irrelevant.

A bipartisan bill called the Protect College Sports Act seeks to regulate the rapidly changing landscape by putting more guardrails around the NIL free-for-all, limiting transfers and allowing schools to spend as much as $27.5 million a year more on players through retention money to prevent perpetual transfers. The legislation cleared a major hurdle on Tuesday with strong bipartisan support, indicating it's likely to pass the Senate before lawmakers recess for midterm elections. It will also have to pass the House, which isn't expected to return for votes until after the midterms.

"The expectations for athletic departments to drive revenue are bigger than ever before," said Amy Perko, who heads the Knight Commission on Intercollegiate Athletics. 

To help fund revenue sharing, schools such as the University of Tennessee added a 10% "talent fee" to ticket prices for all sports. The Volunteers will get a share of the operating revenue from a $288 million entertainment district adjacent to the football stadium, which will include a combined condo and hotel building, stores, restaurants and event space. Private equity firm Arctos Partners is working with developers to build the district. The university will collect $1.5 million a year in lease payments.

Battling tradition

At UNC-Chapel Hill, ambitions for a new basketball arena are in limbo. 

The university is moving ahead with a new campus extension called Carolina North, almost two miles from the main campus. The project, which is expected to kick off next year, includes student and multifamily housing, offices and retail space on land donated to the university decades ago.

The anchor was to be a $786 million basketball arena with improved training facilities, premium seating and suites. The new arena would bring in annual net cash flow of $26 million, according to projections shared by university officials, not counting money from the adjacent entertainment district with shops and restaurants.

A Committee for a South Campus Arena, led by former trustee Rusty Carter, organized a petition opposing the new arena location that has garnered more than 40,000 signatures.

Carter said he worries that the changes in college sports, including the proposed arena, will alienate students and alumni. "You will depart from your truly historical and loyal fan base, and you will leave them behind," he said.

Legendary coach Dean Smith, who died in 2015, felt strongly about keeping Tar Heel basketball on campus, according to Williams. Smith charged Williams with protecting that tradition.

"It's my duty to try to do everything I can to keep it on campus," Williams said. "We can be different, and it doesn't have to be about chasing a dollar."

University officials said that renovating the current facility has severe limitations and that annual net cash flow is estimated at about $4 million — a fraction of the upside in a new location. Critics have questioned the school's projections for the six scenarios it studied. One option is building a new facility near the Smith Center.

"If there were a perfect option, we would have found it by now, but there isn't," said Roberts, the chancellor. "Everything involves trade-offs, and so that's what we have to try to work through."

The university hasn't given a timetable for making a decision, other than saying it was on pause while the new head coach settled in. Michael Malone, the former coach of the NBA's Denver Nuggets, signed a six-year, $50 million deal with UNC in April.

Deep pockets and public financing

Securing the funding to build new facilities can be a challenge.

It took the University of Oklahoma and a related private foundation a decade to move forward with a $1.1 billion entertainment district called Rock Creek, anchored by a $330 million arena, in its hometown of Norman.

The project is on foundation-owned land and is funded with $800 million in private capital investment, plus the issuance of up to $230 million in bonds. The county will own the arena, and the bonds would also help pay for a parking garage and infrastructure. The bonds would be repaid by what's called tax increment financing, meaning that growth in local sales and property taxes from the district will be used to pay back the bonds in 25 years or less.

The project has faced legal challenges from local groups that oppose the development and wanted a vote on the use of public financing. Courts have so far allowed it to move forward, and developers broke ground in May.

The roughly 8,000-seat venue will be the new home for OU men's and women's basketball and women's gymnastics, three of the six sports selected for revenue sharing at the school. About a quarter of the seats will be considered premium, and the arena is expected to open in several years.

"The facility itself will be an attractive recruiting tool because of the quality of the facility, and the increased access to premium seating will be financially beneficial to the teams as well," said Guy Patton, president and CEO of the University of Oklahoma Foundation, which is developing the project. "This will be a huge win for the community."

Booth, the 79-year-old founder of Dimensional, said it wasn't hard for the University of Kansas to persuade him to make a big donation. The Kansas native was an usher and sold popcorn in the stadium as a teenager. He said the complex, complete with a conference center, hotel, student dorms and restaurants, will "have quite an impact" on that part of Kansas year-round.

In addition to donations, the project is being paid for with tax increment financing and bonds that will be repaid with additional sales tax revenue from the district.

As for the business model in college sports, he thinks it'll take five to 10 years for the "chaotic situation" to shake out.

"As a fan, I'm kind of sad to see it happen. As an economist though, I think it's important," Booth said. "Young men and women coming in, this is their chance to make some money, more so than after they get out of school, so it's hard to begrudge them for that."