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Panic at the ACC: How Alston Case, Feds Fueled Financial-Aid Frenzy

Daniel Libit and Eben Novy-Williams
·5 min read

In October, the Atlantic Coast Conference reached out to the Department of Education to solicit guidance about the financial-aid implications of the Supreme Court’s landmark decision in NCAA v. Alston, which determined that the NCAA couldn’t cap education-related benefits for athletes.

The government’s response, which has previously not been reported on, set in motion a weeks-long frenzy within and beyond the ACC. Even today, three months later, the issue has continued to stymie some universities, underscoring just how easily unexpected hotspots can emerge in this era of NCAA upheaval.

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While the Alston ruling has confounded athletic departments, it has also caused confusion for schools’ financial-aid officials. They have to reconcile the Court’s decision with existing regulations regarding federal student assistance.

What has emerged, according to sources familiar with the issue, is the realization that Division I schools have long been operating with different ideas of how to treat outside-aid programs for athletes on scholarship. And as a few institutions, such as Ole Miss, have already cut checks for athletes, others are feeling pressure to define their own approach.

A prevailing concern has been potential “overawards.” Students receive many different types of aid, some directly from the school, some from outside sources, and the U.S. government has a general rule that students receiving federal aid cannot receive more than the total cost of attending school. The Department of Education says that if that happens, the school must reduce any aid it controls to bring the student back under that threshold.

The Alston ruling allows schools to provide athletes education-related benefits, and many on-campus financial-aid officials worried about whether that could push students over their total cost limit.

On Oct. 5, ACC deputy commissioner Brad Hostetter wrote a precautionary letter to Deputy Under Secretary of Education Jordan Matsudaira, seeking to confirm its members’ understanding that Alston payments would not count against those athlete’s financial-aid packages.

“It is our understanding that such a benefit, which is not considered athletics financial aid by the NCAA, will not be considered financial aid pursuant to federal financial aid regulations,” Hostetter wrote, according to a copy of the letter obtained by Sportico. “As such, any money for these purposes would not impact an individual’s current year financial aid package.”

In his email response to Hostetter, Matsudaira seemed to contradict the prevailing post-Alston wisdom by suggesting that any new benefits for athletes could, according to federal rules, count against their financial aid.

“Any source of assistance a student receives as the result of his or her status as a student is considered estimated financial assistance (EFA),” Matsudaira wrote in the email, according to a subsequent memo Hostetter sent to the ACC’s ADs. “Such awards may affect current aid eligibility since they are considered part of estimated financial assistance in calculating student need.”

To some ACC financial-aid officials, this advice appeared to nullify the effect of Alston, since schools would be forced to deduct the amount of an academic achievement award—or any new, education-related benefit—from their grant-in-aid packages, to stay within Title IV compliance. In an interview with Sportico, one ACC school official recalled the Department of Education’s guidance as a “shocker.”

(A spokesman for the department did not respond to a request for comment.)

The exchange quickly led to an anxious round of discussions and debates among ACC schools, conference sources say, and a back in-forth with another federal education official that only served to further flummox ACC school financial-aid offices. Some worried that federal regulations would prevent any full-scholarship athlete from earning benefits from their schools above the cost of attendance, since that would automatically be in excess of their EFA.

Word of the Department of Education’s guidance quickly circulated to athletic departments and conferences around the country, as well as to the offices of the National Association of Student Financial Aid Administrators.

To NASFAA, the Department of Education’s guidance was not as jarring, as it basically reiterated the position previously articulated in the Federal Student Aid handbook: “If a student’s aid package exceeds his/her need, you must attempt to eliminate the overaward by reducing other aid your school controls.”

Still, NASFAA realized there was now a major sticking point when it came to compliance with Title IV, which concerns federal financial-aid funds.

Prior to Alston, “it hadn’t really been raised as an issue,” said Karen McCarthy, NASFAA’s vice president of public policy. “That wording had been in the Federal Student Aid handbook, and we never knew some schools were interpreting it one way and others another way.”

On Nov. 16, after receiving a number of Alston-related questions from its members, NASFAA updated its own online advice “to reflect a clarification from the Department of Education.” Specifically, NASFAA explained that for college athletes whose only source of federal aid was from Pell Grants, institutional athletic aid did not need to be reduced in circumstances where the total assistance exceeded the cost of attendance. By this determination, schools would not need to offset any new Alston monies to their athletes.

McCarthy says that this update seems to have ameliorated the concerns from most of its members about new benefits for athletes.

“My hunch is there is a common acceptance of what schools can or cannot do,” she said. However, several sources, including McCarthy, acknowledge there remains an open question about partial-scholarship players, who receive other forms of Title IV support besides Pell Grants, and whose total aid with Alston benefits may now exceed their cost of attendance.

In the coming months, a number of schools will announce plans for how and if they intend to give additional money to players.

An ACC spokesperson told Sportico that the members have “decided to handle the allowable incentive awards individually by institution rather than as a conference.” This follows similar announcements by the SEC, Big 12 and Pac-12.

In a statement, Hostetter said that his conference members now seem to be on the same page.

“According to our last check-in with the financial-aid offices before the holidays,” he said, “the further clarification has led to a consistent understanding of the financial aid regulations.”