Yesterday was a big day for NCAA athletes as the collegiate governing body approved a waiver allowing athletes to borrow against future earnings to secure a loan in order to purchase ‘loss of value’ insurance.
Previously the Academic and Membership Affairs staff only granted athletes the ability to purchase disability insurance, which would cover them in the event that their college career was ended.
In an official statement the NCAA specified:
“The academic and membership affairs staff approved a waiver to allow a Division I student-athlete to borrow against his future earnings potential to secure a loan from an established, accredited commercial lending institution, for the purpose of purchasing loss-of-value insurance.”
The main issue here was the fact that many athletes would decide to forego their education in order to secure the obscene contracts top prospects receive when they go pro. Under the previous arrangement athletes were not protected in the event that they suffered an injury that caused them to drop several rounds in the draft and/or receive a much smaller signing bonus and salary.
In recent years, schools had used a loophole regarding the NCAA Student Assistance Fund to draw money from the fund and help athletes pay premiums on loss of value insurance. Texas A&M did so with star left tackle Cedric Ogbuehi, as did Florida State with Heisman Trophy winning quarterback Jameis Winston, in effect encouraging them to stay in school another year before turning pro.
Now the NCAA hopes the new legislation will convince more college athletes to complete their studies before they become professionals.
Additionally, in allowing an athlete to borrow money to purchase his or her own loss of value insurance, the NCAA is hoping to eliminate the role of agents, financial advisers or other third parties in such cases (whether legally or illegally).
