HBCUs Face New Financial and Competitive Challenges Following Historic NCAA Settlement
By embracing the recent House v. NCAA $2.8 billion settlement, Historically Black Colleges and Universities (HBCUs) enter a transformative era in college athletics that offers both unprecedented opportunities and daunting challenges. This landmark agreement, approved in early June 2025, allows Division I schools—including several HBCUs—to directly compensate student-athletes, dismantling the NCAA’s decades-old amateurism model and initiating revenue sharing in collegiate sports.
For HBCUs such as Morgan State University, North Carolina A&T, Hampton University, and the University of Maryland Eastern Shore, opting into the settlement means these institutions can now provide financial benefits directly to their athletes while gaining important legal protections related to name, image, and likeness (NIL) rights. This is a historic shift that could enhance HBCUs’ ability to recruit and retain top talent in an increasingly competitive landscape. As Morgan State’s athletic director recently reflected, “This settlement opens doors for our athletes to be fairly compensated but also demands we rethink how we fund and manage our programs moving forward.”
However, while the promise of direct athlete compensation is exciting, the financial realities for many HBCUs present significant hurdles. The settlement caps annual athlete compensation at approximately $20.5 million per school in its first year, a figure that will rise over time. Yet, most HBCUs operate on athletic budgets far below this threshold, especially compared to Power Five institutions or even some wealthier Football Championship Subdivision (FCS) programs. Morgan State, for example, faces a contribution obligation of about $231,000 to the settlement fund, alongside new compliance demands that have already led to adjustments such as reducing football roster sizes to maintain Title IX equity.
This financial pressure is accompanied by complex new roster and scholarship regulations. With the removal of traditional scholarship caps for schools opting into the settlement, HBCUs can fund athletes up to their full cost of attendance. While this policy is designed to level the playing field, it also imposes added financial strain on schools with limited fundraising capacity. As one coach observed, “We want to give our athletes every opportunity, but it’s going to require creativity, community support, and strategic partnerships to keep pace.”
The Southwestern Athletic Conference (SWAC) recently made a unified decision to join the settlement, with all twelve member institutions embracing the new compensation model and abolishing previous scholarship limits on sponsored sports. SWAC Commissioner Dr. Charles McClelland stated, “This is a pivotal moment for our conference. We are committed to equipping our schools and student-athletes to thrive in this new era, both on and off the field.” The conference’s collective approach aims to support its schools through the financial and compliance complexities introduced by the settlement.
Despite these forward strides, the settlement also threatens to widen the resource and competitive gap between HBCUs and wealthier programs. Wealthier institutions and Power Five schools possess deeper coffers and broader networks for endorsement deals, media rights, and booster support, allowing them to maximize athlete compensation packages. In contrast, many HBCUs must depend heavily on passionate alumni, local businesses, and emerging NIL collectives, which often struggle to raise substantial funds. A prominent HBCU athletic administrator candidly remarked, “It’s a new class system in college sports, and we have to find ways to make our culture and legacy part of the value we offer.”
Beyond financial dynamics, the settlement introduces opportunities to elevate the unique cultural fabric of HBCU athletics. Enhanced athlete compensation could help retain standout players who might otherwise transfer to wealthier programs, preserving storied rivalries and traditions that carry significant historical and social weight. Events like the Bayou Classic, the Celebration Bowl, and conference tournaments remain crucial touchstones that bind communities, alumni, and fans. Moreover, as NIL rights expand, HBCU athletes may leverage their platforms to build businesses, brands, and community impact in ways previously unavailable.
Looking ahead, HBCU athletic programs must engage in careful strategic planning. Balancing new equity prospects with financial sustainability will require innovative fundraising, creative NIL partnerships, and rigorous compliance oversight. Coaches and administrators must also advocate for broader institutional support to secure the resources needed for competitive salaries, scholarships, facilities, and athlete services.
Upcoming seasons will offer early tests of this new era. Morgan State, North Carolina A&T, Hampton, and other opt-in schools will begin implementing compensation programs and managing roster adjustments under the settlement rules. Meanwhile, the SWAC’s coordinated approach may serve as a model for other conferences weighing the complex tradeoffs involved.
In this historic turning point, HBCUs face a dual challenge: **to preserve and amplify their rich athletic legacies while competing in a rapidly evolving and increasingly commercialized college sports environment**. Their success will depend on leveraging their enduring cultural strengths, deep community roots, and visionary leadership to transform these challenges into new opportunities for generations of student-athletes to come.