Department clarifies guidance for treatment of name, image, and likeness compensation in the awarding of financial aid
November 11, 2021
Although it may not be an issue for too many students, nonetheless, compensation for a student's name, image, and likeness (NIL) could cause some confusion when awarding federal financial aid.
For that reason, the Department of Education issued a November 8 Dear Colleague Letter (DCL) to provide information to financial aid professionals on how existing policies should be applied when awarding aid to students with NIL compensation.
Student athletes can now receive NIL compensation following a Supreme Court Decision earlier this year and a subsequent National Collegiate Athletic Association (NCAA) policy implemented on July 1, 2021.
In the letter, the Department reminds financial aid professionals that students who receive NIL compensation will be treated as independent contractors and the compensation will be taxable income. However, as with all taxable income, it should be applied to the applicable base year – that is prior-prior year for financial aid purposes.
The Department also reminds schools that NIL compensation is not included in a student's estimated financial assistance (EFA) since it is considered wages and is not based on need. Instead, the NIL compensation is taxable income and would in a later year possibly impact a student's Expected Family Contribution (EFC).
Financial aid professionals with questions about NIL compensation or EFA matters should contact the Department using the Contact Customer Support form in FSA's Partner Connect Help Center.