The U.S. Department of Education issued a Dear Colleague Letter on August 18, 2026 telling every school that receives federal money (preschool through graduate school) that considering a student’s race when handing out discipline violates Title VI of the Civil Rights Act of 1964 and the Constitution, except in circumstances the letter calls “rare and exceedingly narrow.”

Assistant Secretary for Civil Rights Kimberly M. Richey signed the 20-page document. Alongside it, the Office for Civil Rights opened Title VI investigations into two districts: Fayetteville, Arkansas, and Milwaukee, Wisconsin. The letter is the follow-through on a final rule published July 24, 2026 that stripped “disparate impact” provisions out of the Department’s Title VI regulations amidst the ongoing fight over how much of the Department of Education survives at all.

“Disparate Impact” is the legal theory that a rule can be discriminatory because of its outcomes, even when the rule itself never mentions race and nobody intended to discriminate. It is now gone from the Department’s discipline enforcement. Intentional discrimination remains illegal and the office that investigates it is itself the subject of a congressional fight over which agency should oversee it.

Why It Matters

About 49.6 million students attend U.S. public schools, according to the National Center for Education Statistics. When it comes to discipline issues, their suspension and expulsion records follow them into college applications, scholarship decisions, and sometimes juvenile court.

This letter changes the federal standard those decisions get measured against which is why it belongs in the same conversation as the transfer of civil rights oversight out of the Education Department.

Parents are going to see two very different headlines about the same PDF this week, and both will be technically accurate.

What The Letter Actually Says

The change in direction boils down to four points:

• Statistics alone no longer prove a violation. A district whose suspension numbers skew by race is not, on that basis, in violation of Title VI. Proving a violation now requires evidence of intent or of a student being treated differently because of race.
• Neutral codes of conduct are protected. Mandatory-punishment policies, and discretionary categories like “classroom disruption,” “disrespect,” and “insubordination,” are lawful as long as they are applied evenly and were not adopted because of race.
• Adjusting policy to close a racial gap is itself flagged as discrimination. The letter draws a fine line: designing discipline rules to be fair to everyone is fine, but reviewing your racial discipline data and changing decisions because of what it shows is not.
• The guidance carries no force of law. Footnote 1 and footnote 124 both say so plainly: it “does not determine anyone’s rights or obligations or have direct legal consequences.” This signals how OCR intends to investigate, nothing more.

The Department of Education backs its position with teacher survey data from the Fordham Institute:

• 86% of classroom teachers call suspensions useful for signaling to parents that an infraction was serious
• 84% for removing disruptive students so others can learn
• 79% for keeping schools safe

The letter also highlights a chart showing reported firearms in schools falling to 283 in 2019–20 before climbing to 718 in 2022–23, and attributes the swing to the policy shifts of each administration. That is a correlation the letter presents as cause, and it is fair to read it skeptically.

What Critics Say

Sixty civil rights and education organizations (among them the Legal Defense Fund, the Lawyers’ Committee for Civil Rights Under Law, the National Women’s Law Center, and the Education Law Center) condemned the underlying rule in July, writing that it “has no basis in law or morality” and would “clear the way for discrimination that too often deprives students of equal educational opportunity.”

Their main objection: intent is extremely hard to prove, so removing the statistical route leaves families with a right that exists on paper and is difficult to enforce. Rep. Bobby Scott, in a statement, said the change would “drag America back to the Jim Crow era.”

The rule was finalized without a public comment period, which is a separate procedural complaint several groups raised and a likely basis for litigation, much like the challenges that have reached federal courts over other Education Department actions.

What This Means For Your Family, In Simple Terms

Nothing changes at your child’s school tomorrow. Codes of conduct are written by school boards under state law, and this letter does not rewrite them. If your district built race-conscious review steps into its discipline process (some did, under pressure from prior federal guidance) those steps are now legal exposure, and you may see them disappear. If your district never did, you likely will not notice anything.

If you believe your child was punished differently because of race, you can still file an OCR complaint, because racial discrimination in discipline is still illegal.

What changed is the evidence: pointing at district-wide numbers is no longer enough on its own. You need the comparison of a similarly situated student of a different race who committed a similar offense and got a different consequence. Keep the paperwork. Request the incident reports and the discipline records in writing.

This Dear Colleague Letter is about Title VI only. Discipline protections for students with disabilities under IDEA and Section 504, and due process rights under state law, are untouched by it.

If a headline suggests your child lost civil rights protections, that overstates what the document does. If a headline suggests the change is purely technical, that understates the practical difficulty critics are describing. The honest read sits between them, which is also true of most coverage of what dismantling the Education Department would actually look like.

How This Connects

The College Investor has tracked the Department’s restructuring closely, from the executive order directing its wind-down to an inspector general finding that staff cuts of roughly 40% gutted oversight capacity.

Enforcement standards matter less when the office enforcing them has fewer investigators, which is why Senate efforts to block the office transfers are worth watching alongside the guidance itself.

For families weighing a switch to private school over discipline or safety concerns, the 529 rules for K-12 tuition may be helpful depending on your state. So could the new Education Freedom Tax Credit.

The post Federal Guidance Bans Race-Based School Discipline: What Families Should Know Now appeared first on The College Investor.

The U.S. Department of Education filed its reply brief in support of its motion to dismiss in Havens v. U.S. Department of Education on August 17, 2026, closing out the briefing schedule in the last lawsuit still trying to revive REPAYE for roughly 7 million former SAVE borrowers. The filing asks the judge to dismiss the case.

Hours earlier, the Education Department’s lawyers filed a Notice of Corrected Filings walking back a factual claim the agency made on July 29. In an earlier brief, the Department told the court that four of five non-party borrowers who submitted declarations “most recently reported incomes of $0,” which would mean their payments would be $0 under any plan and no irreparable harm existed.

Those borrowers filed counter-declarations on August 7 saying they had reported real income, either directly or through the IRS. The agency investigated, found the borrowers were right, and blamed “technical errors” with its National Student Loan Data System database. It filed corrected versions of both the brief and apologized. Even so, the agency’s core position that the case should be tossed has not changed.

Why It Matters

An agency conceding that its own loan database produced wrong income figures in a federal filing is not a small thing when 7 million borrowers sat in SAVE forbearance for two years waiting on that same system to process applications.

The Department says the error is “largely immaterial” to its legal arguments, and on the merits of this case it may be right. But it hands the plaintiffs a credibility argument at the exact moment the judge is weighing whether borrowers face irreparable harm from being forced off SAVE.

And for the rest of the 43 million student loan borrowers it opens real questions onto the accuracy of their loan accounts in general. This comes as other errors have been found and correct recently, such as PSLF calculations.

What The Borrowers Are Asking For

The four named plaintiffs filed their motion for a preliminary injunction and stay back on June 23, 2026.

Their main ask is a nationwide injunction of what they call the “shadow repeal” of REPAYE and postpone the policy of involuntarily moving enrolled borrowers to other plans, holding everyone in place until final judgment.

The borrowers’ lawsuit centers around four main theories:

• They say the Department repealed REPAYE and its interest subsidy without notice-and-comment or the negotiated rulemaking the Higher Education Act requires, which is the same process the Department followed when it finalized the new repayment plans for July 2026.
• They say the agency exceeded its statutory authority by unilaterally shelving a lawfully promulgated plan and transferring borrowers out of it.
• They say the decision was arbitrary and capricious because the agency gave no reasoning and ignored the reliance interests of millions of borrowers whose data it holds.
• They say enrolling a borrower in REPAYE on request is a duty the agency unlawfully withheld.

The harm numbers are specific, and they are the reason the $0-income error mattered. Havens estimates roughly $64,000 in federal tax liability if her discharge date slides into 2026 or later, while Robeson estimates about $90,000, which she says exceeds her annual income.

That is the student loan tax bomb in practice, and it is only happening because the 2021–2025 federal exclusion has lapsed.

On monthly payment increases, the borrowers claim increases of $196 for Havens, $76 for Grunseth, and $41 for Boykin. They argue none of it is recoverable later if they’re forced to resume, because the APA’s sovereign immunity waiver limits relief to non-monetary remedies.

What The Department Is Asking For

The reply by The Department of Education hass four counterarguments, and each one alone would end part of the case:

• Standing on the tax claims. Havens and Robeson want a court order blocking the agency from sending the IRS a Form 1099-C reporting their future discharges. The Department says that injury is self-inflicted, because borrowers have been eligible for loan forgiveness and simply don’t want to because they missed the deadlines last year. It also argues the IRS (not the Department of Education) has the final say on taxes, so the question is not one this court can fix.
• The REPAYE revival claim. Plaintiffs say vacating the SAVE rule automatically put the 2015 REPAYE rule back into force. The Department says that an agency cannot reinstate an old rule sharing the same legal defect as the one that replaced it, and the Eighth Circuit in Missouri v. Trump held that REPAYE and SAVE share exactly that defect. That is the main ruling that ended SAVE by court order.
• The forced plan switch. The Department notes both sides agree this claim stands or falls with the REPAYE claim. The One Big Beautiful Bill Act requires every ICR borrower to select a new plan before July 1, 2028 regardless, which is why PAYE and ICR are ending and why RAP and IBR are the plans left standing.
• The 11-day window. Plaintiffs argue that when the Eastern District of Missouri briefly dismissed Missouri v. Trump on February 27, 2026, the injunction against the SAVE rule dissolved and forgiveness rights vested during the 11 days before the Eighth Circuit reversed. The Department calls that a collateral attack on the Eighth Circuit and says judicial retroactivity wipes out any theoretical benefit.

How This Connects

The stakes are a lot smaller than many headlines have promised. This won’t revive the SAVE plan. And it’s iffy if it even revives the REPAYE plan. Two plaintiffs are chasing favorable tax treatment and two are chasing monthly payment math totaling about $1,320 over two years.

For most of the 7 million, REPAYE isn’t the best answer. It requires using spousal income even if you file jointly, and it has a 20 or 25 year forgiveness timeline as well. And the payment calculation is identical to PAYE or new IBR.

What’s Next

Now that the briefings are done, we wait.

No hearing is scheduled, and none is required. The judge can rule on the case whenever she chooses, on both the preliminary injunction and the motion to dismiss, most likely in a single opinion.

When can people expect something: No court sets a deadline for this, so any date is an estimate, but there are two hard anchors.

The Department has told the court the earliest a borrower can be forced to move is September 29, 2026, and Heather Havens received a 90-day notice around July 14 that expires in mid-October. If the judge is inclined to pause the transition, she would need to rule before those dates. That points to a ruling in the next four to six weeks, so call it late September.

If nothing comes by early October, that silence is itself a signal — it likely means she is writing a dismissal rather than an injunction, and that opinion could land anytime through year-end.

What could borrowers possibly expect: Three outcomes. Our opinion is that most likely, the court dismisses the case, REPAYE stays dead, and the move to IBR or RAP proceeds on schedule.

Second, the court denies dismissal and lets the case go to the merits, which buys months of uncertainty but does not restore REPAYE or stop the plan switch by itself.

Third and least likely, the court grants a stay pausing the involuntary repayment plan transfers. However, it’s like this would be just a pause, not a REPAYE revival, and the Department would almost certainly appeal within days.

There is also a wildcard worth mentioning: relief limited to the four named plaintiffs, which would be a win in the caption and change nothing for anyone else.

The financial planning assumption for borrowers should stay the same: pick a repayment plan by your deadline. It’s not likely REPAYE is coming back. And continuing to wait is costing you each month.

The post The Final SAVE Plan Lawsuit Is Fully Briefed — Here’s When Borrowers Could Get An Answer appeared first on The College Investor.

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Sen. Bernie Sanders (I-VT) announced on August 17 that he will introduce the Stop Social Security Garnishment Act of 2026, a bill that would permanently bar the federal government from seizing Social Security payments to collect defaulted federal student loans. Senators Elizabeth Warren (D-MA) and Ed Markey (D-MA) are cosponsoring the bill, which comes as more than 9 million borrowers are in default (nearly 1 in 4 Americans with federal student loans).

The bill itself (PDF File) amends Title IV of the Higher Education Act to add a new Section 493E, which states that no payments due under the Social Security Act can be offset under the federal debt collection statute when a borrower defaults on a federal student loan. The protection would cover retirement benefits and Social Security Disability Insurance, and would take effect immediately if the bill passes.

Why It Matters

Under the Treasury Offset Program, the government can currently take up to 15% of a monthly Social Security check to collect a defaulted student loan, as long as the borrower is left with at least $750 per month (Congress set this level in 1996 and never indexed to inflation). Senator Warren has estimated that roughly 450,000 seniors in default could lose over $2,000 per year in benefits if offsets resume at full scale.

The population at risk is not small. More than 3 million Americans over age 62 hold student loan debt, and older borrowers are one of the fastest-growing segments of student loan holders. Many are still paying on loans taken out for themselves or for their children through Parent PLUS loans.

Sanders’ fact sheet notes that over 40% of older workers have no retirement savings, nearly half of seniors live on less than $30,000 a year, and more than 1 in 3 Social Security recipients with student loans depend on their benefits to get by.

For borrowers in that position, a 15% offset can be the difference between making rent and missing it.

What The Bill Does

According to the fact sheet from Sanders’ office, the legislation goes further than past garnishment protections by writing the ban into the Higher Education Act itself. The bill:

• Prohibits the federal government from garnishing any Social Security payments, including Social Security Disability Insurance, to collect student loan debt
• Protects older adults from forced collections on defaulted federal loans
• Ensures beneficiaries keep full access to their checks for healthcare, medicine, and groceries

Notably, the fact sheet points out that an estimated 1 in 5 Social Security beneficiaries with student loans may already qualify for a disability discharge but have never received it — meaning many borrowers facing a garnishment may have student debt that should have been forgiven.

The Collections Backdrop

The bill responds to a collections machine that has been restarting in stages. The Department of Education resumed involuntary collections in May 2025 after a five-year pause, then walked back Social Security offsets in June 2025 following public pressure.

Since then, wage garnishment has been slated to restart, and the Treasury Department has taken over student loan collections from the Education Department, putting the agency that runs the offset program in charge of the debt itself.

We’ve heard from some partners that collections has already restarted on defaulted HEAL loans and FFEL loans, and that collections on defaulted Direct loans will resume soon. In fact, some Redditors have recently posted about their loans being sent to collections.

Sanders’ office frames the bill as a response to the default surge following the end of pandemic-era protections and the SAVE plan’s collapse. The fact sheet cites data showing half of beneficiaries who had a check garnished over a defaulted loan skipped a doctor’s visit or went without a prescription because of cost.

How This Connects

Social Security offsets sit at the intersection of two problems we track closely: the record default cliff and the growing number of borrowers carrying student loan debt into retirement. With the average undergraduate borrower taking 17 years to repay, debt that follows borrowers to age 62 and beyond is now a structural issue of the system, not an edge case.

The bill faces long odds in a Republican-controlled Senate, and no committee action has been scheduled. Watch for whether it picks up bipartisan cosponsors, whether the Treasury Department restarts Social Security offsets this fall alongside wage garnishment, and whether the legislation gets attached to a larger package.

The post Sanders Bill Would Ban Social Security Garnishment For Defaulted Student Loans appeared first on The College Investor.

College athletes are getting paid, and many of them don’t know what to do with it to maximize their long term wealth. The money arrives with no tax withheld, no benefits attached, no HR department explaining anything, and a set of rules that punish anyone who assumes a paycheck is a paycheck.

The window is short, too. NCAA data puts the odds of a draft-eligible football player getting drafted at 1.4%, and men’s basketball at 1.0%, while the NCAA’s own GOALS research found roughly 74% of FBS football players believe they’ll go pro. That gap is where the financial damage happens.

The money comes from selling their Name, Image, and Likeness, or NIL. And it’s big business in college sports today.

Here’s how the money works, what it costs, and what to do with what’s left.

Where NIL Money Actually Comes From

There are two main ways that college athletes earn money from NIL.

Direct payments from the school. After a federal judge approved the House v. NCAA settlement in June 2025, schools could pay athletes directly starting July 1, 2025. Each participating school has a cap in 2026-27 of $21.3 million, fully spendable.

About 319 Division I schools opted in. At most Power 4 programs football takes up to 75% of that pool, with men’s and women’s basketball splitting most of the rest. Olympic-sport athletes at those same schools frequently get no cash at all — just added athletic scholarships.

That makes sense once you realize that 94% of college sports programs lose money.

Third-party deals. Everything not coming from the athletic department:

• Collectives: booster-funded groups that historically drove most NIL dollars
• Brand deals: national brands, regional companies, local restaurants and car dealers
• Social media: sponsored posts, overwhelmingly on Instagram but also TikTok
• Appearances, autographs, and sports camps: one-off checks in the $300 to $3,000 range to show up
• Group licensing: EA Sports pays $1,500 per player for its college football game

Both pipelines are real money, but the spread of who gets paid is real. Opendorse data on Power 4 football players (the single best-compensated group in college sports) showed 66.5% earning under $10,000 a year. Only 0.3% cleared $1 million. The average third-party deal runs about $6,200, and 84% of deals are one-time transactions, not recurring contracts.

That matters for financial planning. For most athletes, NIL is not an income stream. It’s a handful of scattered payments, basically a nice side hustle income rather than a salary.

How Athletes Get Paid And What Forms Matter

College athletes are generally not employees. Schools deliberately structured revenue-share payments as licensing compensation rather than wages, which means no W-2, no income tax withholding, and no FICA taken out.

What athletes get instead is paper:

• Form 1099-NEC for active services — appearances, promotions, social posts, autograph sessions. This is Schedule C income and it carries self-employment tax.
• Form 1099-MISC, Box 2 (royalties) for the passive licensing of name, image, and likeness. Schools often split revenue-share payments between the two. Royalty income lands on Schedule E and is not subject to self-employment tax.
• Form 1099-K if payment ran through an app or platform, though the 2026 federal threshold is high: more than $20,000 and more than 200 transactions.

Two things to note. First, the One Big Beautiful Bill Act (OBBBA) raised the 1099-NEC reporting threshold from $600 to $2,000 starting in 2026, so an athlete with four $1,500 deals may receive zero tax forms on $6,000 of fully taxable income. The IRS is unambiguous: all NIL income is taxable whether or not a form shows up. The royalty threshold on 1099-MISC is still $10, so athletes often get forms for tiny amounts and none for larger ones.

Second, the royalty split is aggressive and untested. The IRS has issued no guidance blessing it, and courts have historically recharacterized “royalties” as service income when the license can’t be separated from the personal services behind it. It’s important here because generally an athlete has to actually play to have marketable NIL. Anyone leaning on a heavy royalty allocation to dodge self-employment tax is taking a position the IRS may not agree with in the end. Royalty income is also unearned income, which can drag a dependent athlete into the kiddie tax at their parents’ marginal rate.

Non-cash compensation counts too. Free vehicles, athletic gear, housing, flights, meals, haircuts, legal services are all taxable at fair market value in the year received. If you get $10,000 in gear from a sponsor, it’s taxable, and you may not easily have the actually cash to pay the tax bill.

One rule that gets confused with the tax forms: every third-party deal of $600 or more must be submitted to NIL Go, the Deloitte-run clearinghouse under the College Sports Commission. That’s an eligibility requirement, not a tax one.

Through July 1, 2026 it had cleared 34,195 deals worth $355 million and denied 1,812 worth about $90 million with 95% approval by count, but only 80% by dollar value.

The Tax Bill Nobody Warns Them About

This is where most athletes get hurt.

Self-employment tax is the main cost, not income tax. The rate is 15.3%: 12.4% for Social Security (capped at $184,500 of earnings in 2026) and 2.9% for Medicare, applied to 92.35% of net profit. Filing is triggered at just $400 of net self-employment earnings.

Self-employment tax is calculated on business profit before any standard or itemized deduction. Run the numbers on an athlete with $20,000 of net NIL profit and no other income:

• Self-employment tax: $20,000 × 92.35% × 15.3% = $2,826
• Taxable income after the half-SE-tax deduction and the $16,100 standard deduction: $2,487
• Income tax after the QBI deduction: roughly $199
• Total: about $3,025 — and more than 90% of it is self-employment tax

An athlete who reasons “I made less than the standard deduction, so I owe nothing” is wrong by about three thousand dollars. Scale that to $100,000 of net profit and the combined federal bill runs a little over $22,000 at 2026 tax brackets.

Quarterly estimated payments may be required since nobody is withholding from this compensation. If you expect to owe $1,000 or more, payments are due April 15, June 15, September 15, and January 15 of the following year. If you miss them, the IRS charges interest: 7% for the first and third quarters of 2026, compounded daily.

Two ways to stay safe:

• Safe harbor. Pay the smaller of 90% of this year’s tax or 100% of last year’s (110% if last year’s AGI was above $150,000).
• The first-year exception. If you had zero tax liability last year, were a U.S. citizen or resident the whole year, and that year covered 12 months, you owe no estimated payments this year at all. A freshman signing a first deal often gets a free pass on year one, but not year two. The residency condition matters for international athletes.

State tax is a second layer. Your home state can tax everything you earn, and states where you perform work (an out-of-state photo shoot or signing) can tax that piece too. California tops out at 13.3%, New York at 10.9%, while nine states don’t tax wage income. Attending school somewhere doesn’t automatically make you a resident, but a year-round off-campus lease plus 183-plus days in state can trigger residency. Basically, it’s complicated…

Arkansas became the first state to carve NIL out of its income tax under Act 839 in 2025, though the exemption covers only money paid by the school so third-party deals are still taxed. Several other states have similar bills pending. But these rules would affect state tax only. Federal and self-employment tax are untouched.

One more surprise. Athletes on full scholarships already have taxable income they don’t know about. Tuition, required fees, and required books are tax-free under Section 117. Room and board are not and can add $12,000 to $18,000 of taxable income to the athlete, stacked on top of NIL earnings.

Should Athletes Form a Business Entity?

The short answer is no. Most college athletes shouldn’t bother, and the ones who do create an entitu usually misunderstand what they’re doing.

Sole proprietor (Schedule C) is the default. No formation, no fee, no separate return. This is correct for the large majority of college athletes, and it’s where side business deductions live.

A single-member LLC is a disregarded entity for federal tax purposes. It changes nothing about what you owe. What it does provide is a contracting entity with its own EIN and bank account, which keeps the athlete’s Social Security number off brand paperwork, and a clean home for trademarks and IP that survives a transfer.

What an LLC does not do is the part athletes get sold wrong. It creates no deductions and reduces no self-employment tax. And it does not shield you from your own conduct like a defamatory post, a car accident driving to a shoot, an FTC disclosure violation, a contract you breached. Nearly all of an athlete’s liability exposure is personal, and an LLC covers almost none of it. Protection also disappears the moment you commingle funds, which is exactly what a 19-year-old with one debit card tends to do. A media liability insurance policy may be a better choice depending on the scope of the NIL deals.

An S-corp election is an actual tax lever, but there are strict rules. You must pay yourself a reasonable W-2 salary subject to payroll tax, take the remainder as distributions exempt from self-employment tax. Practitioners generally put the breakeven of setting this up as requiring around $80,000 to $100,000 of net profit, but for NIL athletes it’s higher, and here’s why.

The 20% qualified business income deduction under Section 199A was made permanent by the OBBBA. Athletics is explicitly a “specified service trade or business,” and so is income from endorsing products or licensing your name and likeness. That sounds disqualifying, but it isn’t for most athletes: SSTB status is irrelevant below the income threshold. For 2026, a single filer with taxable income at or under $201,750 gets the full 20% deduction regardless. Between $201,750 and $276,750 it phases out across that range. Above $276,750 an athlete gets no QBI deduction.

The catch: W-2 wages you pay yourself through an S-corp are not qualified business income. Shifting $60,000 to salary erases $12,000 of QBI deduction, clawing back much of the self-employment tax savings. Run the math for the actual athlete rather than assuming the generic threshold applies.

Costs add up with an S-Corp. Payroll costs runs $500 to $1,500 a year plus $1,000 to $2,500 for the 1120-S return, and California taxes S-corps at the greater of $800 or 1.5% of net income. If you owe taxes in multiple states, expect your tax prep costs to increase as well.

Two other warnings: a family member “managing” the LLC can accidentally be acting as an unlicensed agent under state athlete-agent statutes, and international athletes on F-1 visas face real immigration problems operating a business.

What NIL Actually Costs to Earn

Athletes usually only look at gross deal value. What matters is net. And yes, even earning NIL money has expenses.

Agent and manager commissions vary by deal type, and this is where athletes usually see the biggest expense. Industry guidance generally puts the ranges at:

• Collective deals and revenue sharing: 0% to 3% — the agent didn’t generate this money
• Brand-initiated deals that come to you: 10% to 15%
• Deals the agent sourced and negotiated: 15% to 20%

Anything above 20% is widely considered predatory, and some practitioners peg collective and rev-share work closer to 5%. Paying 15% on a revenue-share check is paying a finder’s fee on money that arrived on its own. NFL agents, for comparison, are capped at 3% of salary.

Other real costs: marketing, contract review, accounting and tax prep, travel to appearances, content production, equipment. The good news for Schedule C athletes is that all of those are deductible against NIL income, along with the business-use share of phone and internet.

Two things to be aware of:

1. Training and coaching costs are contested and the IRS generally treats athletic training for a student-athlete as personal or educational, not an ordinary and necessary cost of the NIL business, and no published authority supports the athlete-side argument.
2. If any of this income gets reported on a W-2 (some collectives structure it that way, and athletes could be reclassified as employees down the road) none of those expenses are deductible at all, because the OBBBA permanently repealed miscellaneous itemized deductions. An athlete paying a 15% commission on W-2 income is taxed on the gross and eats the fee with after-tax dollars.

Saving and Investing NIL Money

What most young adults miss about saving and investing is that order of operations matters more than any individual investment selection.

1. Open a separate savings account and move 30% to 40% off the top the day money lands. Every deal, every time. This is the tax account, and it is not spending money. Athletes in high-tax states or above the Social Security wage base should be closer to 40%. Nothing else on this list matters if this step doesn’t happen.

2. Build three to six months of expenses in a high-yield savings account. NIL income is lumpy and can stop without warning — a coaching change, a transfer, a torn ACL, a collective that runs out of donors. Creating an emergency fund matters more here than for a salaried worker, not less.

3. Fund a Roth IRA. The single best move available to a college athlete, and sadly underused. Net self-employment income counts as IRA compensation, so Schedule C NIL income qualifies. The 2026 Roth IRA contribution limit is $7,500.

Contributions come out tax-free at any time for any reason, so it doubles as a backstop. A 19-year-old is in the lowest tax bracket they will ever occupy, which is exactly when Roth beats traditional. And retirement balances are excluded from FAFSA assets entirely, while Roth contributions aren’t added back as untaxed income. Money in a Roth is invisible to the aid formula. Money in savings is not. Opening one takes about fifteen minutes at any of the major IRA providers.

4. For high earners, open a solo 401(k) or SEP-IRA. Self-employed athletes can shelter far more than $7,500. A solo 401(k) allows a $24,500 employee deferral for 2026 plus an employer contribution, up to a combined $72,000. One caveat: deductible self-employed retirement contributions get added back as untaxed income on the FAFSA, so this cuts the tax bill but not the aid hit. Only the Roth does both.

5. Then invest the rest simply. Low-cost index funds in a taxable brokerage account. No crypto concentration, no stock picking, no startup, no “opportunity” from someone who found you because you got paid.

What to avoid: buying a car in year one, cosigning anything for anyone, custodial UTMA/UGMA accounts before anything else (student assets on the FAFSA at 20%, no protection), and any lifestyle inflation.

How NIL Money Impacts Financial Aid

This is the part that catches families completely off guard, mostly because of the timing.

The FAFSA runs on a two-year lag. The 2027-28 FAFSA uses 2025 tax return data. NIL money earned in calendar year 2026 does not show up on the 2027-28 FAFSA at all — it first appears on the 2028-29 FAFSA, filed around October 2027, affecting aid for the school year starting in fall 2028. Worth checking FAFSA deadlines against your own timeline.

Two practical consequences. A college senior earning big NIL money in 2026 may never see a FAFSA hit, because they graduate before the income shows up on FAFSA. A freshman earning big NIL money in 2026 gets hit as a junior, sometimes after the money has stopped.

Student income is assessed hard. All aid formulas expect students to use their own money to pay for college before receiving any “free” aid. After a small income protection allowance ($12,220 for a dependent student in 2027-28) and allowances for income tax and payroll tax, half of what’s left gets added to the Student Aid Index. Roughly $50,000 of NIL income adds about $15,000 to the SAI, which cuts need-based aid eligibility by roughly the same amount against cost of attendance.

Saved money gets assessed again, every year. Student assets are counted at 20% with no protection allowance whatsoever. Leave $30,000 sitting in savings and it adds $6,000 to the SAI annually, on top of the income hit.

Pell Grant Limits. Starting in 2026-27, the OBBBA bars Pell Grants for any student whose non-federal grant and scholarship aid equals or exceeds their cost of attendance. Full cost-of-attendance athletic scholarships are non-federal institutional grant aid. Athletes on true full rides lose Pell eligibility outright.

Private colleges treat things differently. The CSS Profile asks for projected earnings for the coming academic year, not just prior-prior year data, so at a CSS Profile school NIL income affects institutional aid the same year it’s earned. Those schools also assess student assets at roughly 25% and count home equity.

NIL itself is not treated as financial aid. The Department of Education confirmed in 2021 that NIL compensation is non-need-based income, not “other financial assistance,” so it doesn’t cut your package directly — it hurts through the income side of the formula two years later. Athletic scholarships do reduce remaining need immediately.

Planning For A Short Earning Window

Two-thirds of Power 4 football players earn under $10,000 a year. The overwhelming majority of college athletes will never take a professional paycheck. Under the age-based eligibility model the Division I Cabinet adopted in June 2026, athletes get up to five years, but most get less than that because of transfers, injuries, and roster cuts.

So the planning problem isn’t “how do I invest my millions.” For nearly everyone it’s “how do I keep a two-to-four-year run of irregular income from turning into a tax headache, a lost scholarship, and nothing to show for it.”

Here’s some things to plan for:

Assume the money stops. Structure everything around a fixed window, not a career. Don’t sign a lease, buy a car, or take on a payment you couldn’t cover on a normal salary.

Pay the tax first, every single time. A separate account and an automatic transfer is worth more than any investment decision on this list.

Get your education. A scholarship covering tuition at a school that would otherwise cost $200,000 is often the best financial asset in the deal. Finish the degree, take the internship, build the network and if there’s money left over, invest it.

Hire a CPA before you need one. Not in April. Find someone who has handled multi-state self-employment income before the first big deal closes. The fee is tax write-off and cheaper than tax problems later.

Read your agent agreement. Check the commission rate against the deal type, the term, the termination clause, and whether the agent is registered under your state’s athlete-agent statute. For example, California requires a $100,000 surety bond and Florida requires licensure. An unlicensed agent is a problem you inherit.

Keep records like a business. Receipts, mileage logs, contracts, every 1099. Schools and collectives often run payments through several different processors, so a single year can produce a stack of forms arriving at different times from different places. Nobody is going to assemble that for you.

The athletes who come out ahead aren’t usually the ones who earned the most. They’re the ones who treated a short, lumpy, fully self-employed income stream like the small business it legally is and paid the tax, kept the overhead low, funded a Roth, and finished the degree.

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