NIL-Driven Spending and the Debt Feedback Loop

NIL has reshaped college athletics almost overnight, and with it, the risk landscape for universities and their insurers. As athletic departments seek to remain competitive in recruiting and athlete retention, Name, Image, and Likeness (NIL) expectations have become embedded in broader institutional financial planning.

Even if universities indicate that NIL compensation is paid by third parties, rather than the institution itself, institutional budgeting, facilities planning, and capital allocation decisions increasingly assume the availability and durability of NIL funding. That assumption has translated into aggressive facility expansion, expanded borrowing secured by anticipated media and donor revenue, and long-term financial commitments justified by the need to remain competitive within NIL-driven conferences.

Importantly, this escalation in athletic debt is occurring at the same time federal regulators have begun scrutinizing the NIL ecosystem itself. In January 2026, the Federal Trade Commission announced that it had sent formal information requests to approximately 20 universities and sports agents concerning compliance with the Sports Agent Responsibility and Trust Act (SPARTA). The FTC’s inquiry focuses on whether universities are adequately monitoring, documenting, and responding to sports-agent conduct connected to NIL arrangements. This marks one of the first instances in which federal regulators have signaled that universities may be responsible for oversight failures within the NIL marketplace.

From a management and professional liability insurance perspective, heightened scrutiny over whether university leadership adequately assessed regulatory volatility, disclosure obligations, and operational controls while committing the institution to long-term financial obligations premised on NIL-driven assumptions may be required. The following will discuss potential exposures tied to the increased university borrowing and emerging regulatory interest in university oversight of NIL agreements with student athletes.

From Financial Strategy to Management Liability Exposure

Debt alone does not trigger management liability risk. However, debt incurred on the basis of forward-looking assumptions about NIL sustainability and regulatory stability may introduce management liability risk. University leadership teams, including presidents, boards of trustees, athletic directors, and chief financial officers, are making long-term judgments about revenue durability in an environment where NIL rules remain unsettled, athlete compensation models continue to evolve toward revenue sharing, and federal scrutiny of NIL practices is accelerating.

Athletic department borrowing tied to assumptions about NIL sustainability introduces forward-looking judgment calls by boards, presidents, CFOs, and athletic directors. If those assumptions fail due to regulatory intervention, donor fatigue, conference realignment, or litigation, university professional liability carriers may face exposure arising from claims alleging breach of fiduciary duty, mismanagement, or failure to adequately assess risk.

Federal Oversight Converts NIL Into a Compliance Risk

The FTC SPARTA letters may signal heightened regulatory scrutiny that could reframe NIL into a regulated operational function, where failures of oversight may constitute institutional wrongdoing. Importantly, the FTC’s inquiry extends beyond agent misconduct itself to whether universities maintained adequate systems for tracking agent relationships, retaining records, and responding to athlete complaints. When layered on top of NIL-driven debt exposure, this oversight creates compounded risk: management decisions premised on NIL stability are now subject to regulatory review of the very ecosystem on which those decisions rely.

For university management and professional liability carriers, there may be coverage for regulatory inquiries, which would provide expense coverage incurred in responding to investigations, document requests, and alleged failures of oversight.  It may also shine a spotlight on which AD compliance systems are informal, decentralized, or poorly documented.

E&O Risk When Oversight and Administration Fail

Universities participating in NIL at scale may also face Errors and Omissions (E&O) exposure tied to administrative and professional services functions. Causes of action may be brought against ADs stemming from review and execution of NIL agreements, oversight of affiliated collectives, recordkeeping and disclosure obligations, and responses to regulatory inquiries. If a university lacks documented compliance protocols, centralized reporting, or historical records, and those deficiencies contribute to regulatory action, donor disputes, eligibility issues, or litigation, a claim brought by an athlete, donor, or employee may be alleged as a professional failure to administer a regulated activity.

Thus, E&O exposure may arise from allegations that compliance officers, general counsel, or athletic administrators failed to implement reasonable systems and controls, particularly once federal oversight of NIL and agent activity became foreseeable.

Implications for University Risk Management and Insurance

For universities, NIL implicates enterprise risk management, board oversight, financial disclosures, and regulatory compliance functions. Institutions that continue to treat NIL as an external or donor-driven activity risk being unprepared when financial leverage and regulatory pressure converge. From an insurance perspective, universities may face difficult questions regarding whether NIL-related investigations trigger coverage, how professional liability policies respond to compliance failures, and whether existing D&O programs adequately contemplate NIL-driven governance claims.

Closing Observation

NIL has quietly transformed college athletics into a leveraged and increasingly regulated enterprise, where competitive pressure fuels debt, and regulatory oversight tests institutional controls. The resulting exposure is not merely financial; it is managerial. As NIL obligations continue to grow, and federal authorities signal that universities themselves are accountable for oversight, management liability, and E&O risk may become defining insurance issues for higher education athletics in the years ahead. What once appeared to be a recruiting advantage may ultimately be evaluated, in hindsight, as a governance decision with litigation consequences.

Meet the Author

Sarah Abrams

Executive Vice President, RT ProExec – The OakBridge Team

Sarah M. Abrams is an attorney and Executive Vice President of The OakBridge Team within RT ProExec. The team specializes in the placement of Executive, Cyber, Professional, and Transactional Liability insurance products. Before joining RT ProExec – The OakBridge Team, Sarah held senior leadership roles in professional liability and management liability claims.

Sarah is an active industry speaker and writer on D&O and professional liability topics, including as a regular contributor to the D&O Diary and Law360. She has served as a panelist, moderator, keynote speaker, and guest lecturer at programs sponsored by the Professional Liability Underwriting Society (PLUS), the New York City Bar Association, Columbia University, Practising Law Institute (PLI), and other industry and academic organizations.