Paying college players–cost of attendance stipends

The Raleigh, N.C. News and Observer had a front pager yesterday on the changes that are coming to college sports regarding paying players. There are so many issues, and so many questions, but a key one is understanding a key University concept, “the cost of attendance (COA).” Duke University’s COA for 2014 is shown below:

Dukecostofattendance

Historically, the NCAA has prevented University’s from covering the full COA via an athletic scholarship, but the ruling in the Ed O’Bannon case stated that this could not continue. An athletic scholarship covers Tuition and mandatory fees, as well as room and board, but not other expenses. However, personal expenses such as books are not covered by an athletic scholarship (under Duke’s need based financial aid system, it is possible an athlete could get aid for these expenses, depending upon family income).

The News and Observer article terms the covering of what above is called “books and personal expenses” as a stipend. Note the differences in the Triangle of the costs of “books and personal expenses.”

  • At Duke, $3,466
  • At N.C. State, $3,828 for both in and out of state students
  • At UNC, $4,382 for in state, and $6,118 for out of state

These differences reflect policy choices by the schools, not just for their athletic programs. Merit based scholarship programs such as the B.N Duke and A.B. Duke don’t cover the full cost of attendance, but Duke’s need based financial aid program does (potentially, depending upon income) cover the full cost of attendance. At Duke there is also sensitivity about how large the “full cost of attendance” figure is, so there may be extra incentive to keep the “books and expenses” figure as low as possible.*

Calculating the full cost of attendance figure at a University is a highly idiosyncratic process, and there are many competing incentives. A quick look at the spread in the “books and expenses” aspect of Duke, UNC and NC State’s demonstrates. At UNC and NC State, around 8 in 10 undergrads have to be from the State of North Carolina. UNC shows a different figure for out of state as compared to in state, while NC State does not. Duke has about as many undergrads in a given class from California as there are from North Carolina, so it is hard to imagine how this amount in the expenses component at Duke could be lower than the in state figure at UNC.

I am not saying there is anything nefarious going on, but it is also hard to see how these figures at these three schools located within 30 miles of one another represent an externally validated cost to students. The Ed O’Bannon ruling is bringing attention to the cost of attendance figure for athletes, but this figure is important for all students at a University’s as a whole, and is set amidst a sea of many competing influences. The process of setting these figures seems murky, especially to families trying to compare across University’s. Because of increased attention due to athletics, the bright lights are coming.

*Duke has robust need based financial aid; the diddy I have learned is that a year at Duke costs $90k, we charge $63k and collect $30k. Around half of the undergrads pay full freight, and the other half is sliding based on income.

cross posted at freeforall

Author: Don Taylor

Don Taylor is an Associate Professor of Public Policy at Duke University, where his teaching and research focuses on health policy, with a focus on Medicare generally, and on hospice and palliative care, specifically. He increasingly works at the intersection of health policy and the federal budget. Past research topics have included health workforce and the economics of smoking. He began blogging in June 2009 and wrote columns on health reform for the Raleigh, (N.C.) News and Observer. He blogged at The Incidental Economist from March 2011 to March 2012. He is the author of a book, Balancing the Budget is a Progressive Priority that will be published by Springer in May 2012.

16 thoughts on “Paying college players–cost of attendance stipends”

  1. I'd love to see the breakdown between "books" and "other". Because if books are costing kids several grand a year there's something wrong with that market. The differential between in-state and out-of-state suggests that a large portion of the money is travel home. But still…

    1. There are plenty of classes for which the textbooks can run $150+. A couple of thousand dollars a year for books is certainly not all that rare. And, yes, the textbook market is a racket.

  2. Ah me! I recall paying $15 per credit hour at a respected private university, walking ten minutes from home (no board and room) and paying about $5 per inch for books (maybe 12" worth although my K&E slide rule cost $25).

  3. This really highlights a major flaw in Judge Claudia Wilken's quasi-legislative ruling that the NCAA schools should pay the costs of education without forcing schools to compete in the market like other professional sports teams. These athletes are employees. They should be paid in cash and benefits, like everybody else that works for the university.

    Wilken's decision doesn't really address the critical element which is the imbalance between the profitability of a university's professional sports franchise and the way the employees of the franchise are compensated. The schools make millions. The coaches make millions. Why should the athletes be limited to the cost of attending plus $5K per year?

    1. There are plenty of student employees that receive some or all of their compensation in the form of tuition or living stipends. It’s not just athletes.

      1. Yes, it's true that many students employed by schools are paid in that way. The difference is that these kids are not really employees of the colleges but instead are employed by what is in reality a lucrative professional sports franchise that just happens to be owned by the college. Everyone else who works for that sports franchise is free to demand whatever compensation the market will bear, including endorsements and appearance fees, and to offer their services to other teams without the restrictions imposed on players by the NCAA.

        If coaches were compensated the same as teachers at the college, then maybe it would be fair to treat the workers who produce tens of millions of dollars of revenue as "student athletes". Until that blessed day, I will continue to argue that the NCAA and the colleges are guilty of the cruel exploitation of these young men.

        1. Even within the athletic department there are student interns that are paid in part or entirely with tuition credits.

          1. That's undoubtedly true but completely irrelevant. I am talking about students (nominal and otherwise) who are essentially professional athletes playing for sports franchises where the colleges make vast fortunes and the coaches makes smaller fortunes. The only difference between these "student athletes" and their NFL counterparts is that the students have been forced to serve unpaid apprenticeships in order to become eligible for employment in the NFL.

  4. One issue that lurks in the background, but which I have not seen adequately discussed, is the liability of the college for worker's compensation and/or disability insurance to compensate athletes for injuries sustained in the course of their athletic "careers." For a recent case dealing with worker's comp in the context of professional football, see Pro-Football, Inc. v. Tupa 197 Md. App. 463 (2011), which can be downloaded here: http://bit.ly/1tg6sRo There, the NFL and the Washington team contended that pro football players were not covered employees for worker's comp purposes. The Court found to the contrary.

  5. the diddy I have learned is that a year at Duke costs $90k, we charge $63k and collect $30k. Around half of the undergrads pay full freight, and the other half is sliding based on income.

    I don't know what "diddy" is but this doesn't sound right. If half pay full freight then you are collecting $31.5K/student (all students) from that group alone. Also, the $90K number is suspicious. Is that for undergraduates? If so, how are costs allocated between undergraduate education, graduate education, grant-generating research, etc.?

  6. There is a point so central that it is usually overlooked. Big time college sports — essentially the top divisions of football and men's basketball — has a screwy legal and economic structure that is sui generis; it exists nowhere else in our economy, or anybody else's. A large and lucrative sports industry has as its workforce individuals who are theoretically amateurs pursuing a college extra-curricular activity. Actually, the majority of them are, more or less, but the most economically significant players are not, in any real sense. It should never have been done this way; American higher education allowed it to happen in a century-long slow motion blunder. However, it is now very deeply entrenched, both commercially and culturally. The "right" answer would be models similar to those of hockey and baseball, with college scholarships serving as one optional path to the top professional leagues, but alongside good systems of professional minor leagues. But then, it is no coincidence that college baseball and hockey are much smaller businesses. Getting from here to a more sensible there for basketball and football is going to be exceedingly difficult, because many powerful and entrenched interests like it the way it is. Also, the non-athletic college administrations are already ambivalent about what they have, and really really don't want to own explicitly professional sports franchises. Good luck with that.

    1. Its basically going to take more law suits.

      The irony is that most student-athletes, even in the major sports at the biggest schools, wouldn't be worth the value of their scholarship on the open market in some kind of minor league system (at least based on the value of minor league players in other sports).

    2. But then, it is no coincidence that college baseball and hockey are much smaller businesses.

      It should be noted that college football and basketball were hugely popular before the associated major leagues were even off the ground. With baseball and hockey, what we think of as the minor leagues predated the rise of college sports at all.

      1. Your statement of the history is entirely correct, and helps explain how the current situation arose. The bottom line remains that big time college sports have an idiosyncratic and defective structure, which is nevertheless deeply entrenched and difficult to alter in any fundamental way.

      2. Of course baseball in particular is not well-suited to being a major college sport, simply because it is mostly played when school is out of session.

  7. How can the powers that be shackle young athletes, but not hold others to the same standards? How can an institution profit financially from the gifts and talents of the students, but not share those profits? How can someone make money from my likeness and I not benefit? And don't tell me about a free education! If an institution makes a million dollars by selling my jersey, I've paid for my education and more. It's time to end slave labor. This is American by the way. Indeed this is the land of the "free", but there is a fee for my labor. This is a capitalistic society.

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