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How NCAA rich will stay richer: Two-tier economy

A 16-2 decision by the NCAA on Aug. 7 could change the way collegiate sports operate, creating a two-tier economy with the five most powerful Division I conferences able to redefine the relationship between schools and "student-athletes."

Coming just a day before the landmark district court decision siding with former UCLA basketball star Ed O'Bannon, who sued the NCAA over use of player names and likenesses, experts content the end of the "amateur" college athlete era has arrived and, some argue, the proposed NCAA autonomy system was timed to preempt a court decision the NCAA expected to go against it.

Ed O'Bannon
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Ed O'Bannon

This NCAA "autonomy system" covers 65 institutions in the ACC, Big Ten, Big 12, Pac-12 and the SEC. According to the NCAA Division 1 Steering Committee, which is made up of senior NCAA staff as well as various presidents of universities, the schools involved will be allowed to act autonomously with regard to the treatment, and reimbursement, of student-athletes.

According to the Steering Committee: "These institutions are further challenged in addressing these needs by an increasingly litigious environment and confused public sentiment. They face the most public comment and criticism of all Division I institutions and conferences, often from advocates for pay for play or a professional athletics system for colleges and universities."

Read MoreThe end of the amateur student-athlete era

The NCAA believe the changes will lead to the creation of "the optimal student-athlete experience based on available resources."

The following five changes to NCAA bylaws from among the broader set of autonomy proposals relate directly to financial reimbursement of students-athletes.

Insurance and career transition

Existing NCAA bylaw states that any contact with an agent for a professional team will deem that student ineligible for collegiate sports. The new autonomy ruling will allow the 65 member schools across the five conferences to redefine the parameters with regard to agents and advisors. This rule change should help the student-athletes with their future career planning and future decision-making. Schools would also be allowed to provide to student-athletes insurance-related expenses and/or help students secure loans related to career risk (loss-of-value insurance).

Meals and nutrition

Existing NCAA bylaw permit only a finite amount of meals per student-athlete at specific situations. With the newly granted autonomy, the 65 schools can now decide on how many meals they are allowed to offer their student-athletes. New rules could address specific needs of student-athletes on a case-by-case basis.

Expense and benefits (Student–athlete support)

According to NCAA bylaws, "A student-athlete shall not receive any extra benefit. Receipt by a student-athlete of an award, benefit or expense allowance not authorized by NCAA legislation renders the student-athlete ineligible for athletics competition in the sport for which the improper award, benefit or expense was received."

Now, the 65 member schools can create their own rules and limitations with regard to student-athlete benefits. Immediate family members of a particular student-athlete can also benefit. Some examples highlighted by the Steering Committee include, "expenses for receipt of awards, complimentary admissions, postseason travel for friends and family, expenses incidental to practice (e.g., parking), and other expenses in conjunction with practice and competition."

These schools are also allowed to set their own regulations with regard to expenses and benefits to prospective student-athletes and the pre-enrollment period, including campus visits, transportation and recruiting period costs incurred.

Financial aid

Under the newly proposed system, the 65 schools are allowed to give as much financial aid to their student-athletes as they deem necessary.

According to the Steering Committee, "The conferences will be granted flexibility to increase the maximum grant-in-aid (up to an amount commensurate with the full cost of attendance), as well as the ability to provide scholarships that will allow former student-athletes to complete their undergraduate education in appropriate circumstances."

Health and wellness

The schools will have the freedom to provide as much health care as possible to their student-athletes. Existing NCAA rules were deemed permissive but the Steering Committee stated that these 65 institutions should have freedom to support student-athletes' needs, and the responsibility to lead on these issues.


What's next?

Under this proposed governance model, autonomous legislation that is developed and adopted among these institutions and conferences may also be applied by the rest of Division I at each conference's respective discretion, which may include delegation of such discretion to its member institutions.

There is now a 60-day comment period, during which universities can voice disapproval and ask the NCAA board to reconsider its decision. Board reaffirmation of the decision will lead to a vote by all Division I universities, requiring a five-eighths majority to overturn.

By Ike Ejiochi, special to CNBC.com

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