Name, Image, and Likeness Payments Affect Your Student Aid Index Calculation

On July 1, 2021, the NCAA permitted student-athletes participating in sanctioned NCAA sports to profit from their name, image, and likeness (NIL). Since then, many student-athletes, mainly at the upper echelons of Division I, have benefited tremendously from this rule change. But did you know that NIL payments can drastically alter a student’s eligibility for federal student aid?

Beginning July 1, 2026, the federal government will treat NIL compensation as reportable taxable income. Aside from IRS implications, this legislative change will have two primary effects on federal financial aid.

First, it will result in a direct increase in a student’s Student Aid Index (SAI) figure. The SAI is a formula that the federal government uses to determine a student’s eligibility for need-based and non-need-based financial aid awards. When a student earns NIL compensation, it has the potential to increase their adjusted gross income, which, consequently, will reduce the student’s ability to receive need-based aid, such as a Pell Grant or subsidized loan.

Now, the SAI calculation includes income protections for students who earn income from work. The income protection allowance for students is approximately $11,770, so earnings above this figure can affect a student’s SAI calculation. Thus, any NIL earnings above this figure will go into the SAI calculation at a higher rate, which can quickly turn a low SAI into a high one.

As discussed in a nearby article, the federal government also ended a loophole that created “Pellionaires.” Pellionaires are students with relatively low income but a high asset amount. In the past, some student athletes who had accumulated high earnings through NIL compensation were still eligible for a Pell Grant because their earnings level was below the threshold (despite a high asset balance in the student’s checking or savings account). This change will mean fewer student-athletes will be eligible for a Pell Grant if their NIL compensation is obscenely high or if their non-federal aid funding in their financial aid package fully covers their cost of attendance.

What else should student athletes be aware of?

Student athletes who are receiving NIL funding should understand the following:

1. NIL deals often mean a student is subject to self-employment tax.

Most advanced NIL deals categorize student-athletes as independent contractors. Students who fall into this bucket must file a Schedule C during tax time and may be subject to self-employment tax at the federal and state levels.

2. Non-cash compensation counts as taxable income.

The fair market value of free athletic gear, products, or travel expenses paid through an NIL agreement is reportable as taxable income. This increase in taxable income can cause a student’s SAI figure to balloon further away from need-based aid.

3. Remember: the FAFSA uses prior-prior, tax year data.

When you complete FAFSA, it does not use this year’s tax data. Students who are completing a 2026-27 FAFSA will use 2024 tax-year data. While this may seem odd, it benefits students financially. Suppose your adjusted gross income in 2024 was very low because your earnings were minuscule at best. The lower a person’s adjusted gross income, the lower their SAI figure will be, which means additional access to need-based aid. But what if your NIL deal in 2025 increased your adjusted gross income substantially? You now have an extra year to plan for that change to your SAI. Consulting a financial aid counselor may make the most sense if you harbor concerns about your financial aid package in future award years.