Prioritizing Smart Planning Over the Scholarship Gamble
By Peter Carlisle
May 23, 2023
Every year, millions of families pour time, energy, and thousands of dollars into youth sports—many driven by the hope that it will lead to a college athletic scholarship. In fact, a 2019 Harris Poll found that nearly half of these parents believe their investment in youth sports will pay off in the form of college tuition assistance. [1]
But the odds say otherwise.
Only about 2% of high school athletes receive any NCAA athletic scholarship, and even then, most awards cover only a fraction of total college costs. For the overwhelming majority, the pursuit of an athletic scholarship won’t come close to covering college expenses—and the journey itself is expensive.
This paper offers a financial reality check: What are families actually spending on youth sports? What are they likely to get in return? And how might a different financial strategy—like a long-term college savings plan—offer a better path to both athletic and academic success?
In the discussion that follows, I distinguish between “pre-tax” and “after-tax” numbers because to budget one must balance cash outflows (expenses) against inflows (income). As a matter of perspective, for longer-term planning there is a tendency to consider one’s salary or wages rather than the actual cash received after federal, state, and FICA taxes are withheld. For example, a $5,000 expense equals 10% of a $50,000 salary before taxes. However, it consumes 13% of the $38,290 available after taxes.[2] That is a 30% increase that should be factored into planning.
From a strictly financial standpoint, the value of a scholarship is the extent to which it reduces the cost of attending college. U.S. News & World Report reported that the average annual cost of tuition and fees for public, in-state colleges is $10,662,[3] putting the average four-year cost at $42,648. For most parents in the U.S., covering the $10,662 annual tuition would require $13,923 in pre-tax earnings—or $55,692 over four years.
Similarly, when planning for expenses associated with private youth sports participation, such as travel teams, parents may be inclined to total the incremental annual costs from age 10 through high school and compare that number against college expenses.[4] Such costs (which often include club fees, equipment, travel, camps, coaching, gas, trainer, etc.) vary among sports and regions but often range between $1,000 and $10,000 per year. For purposes of illustration, if annual costs were to average $3,250, the total over that nine-year period would be $29,250, but because parents pay with after-tax money they would need to allocate $4,244 in pre-tax salary or wages each year (and $38,196 over the nine-year period).
The return on this “investment” (again, from a purely financial standpoint) is the extent to which a scholarship actually reduces college costs. Unfortunately, this is impossible to determine at the time most parents begin planning for both sports and college. There are, however, statistics that show just how speculative it is to expect an investment in youth sports to pay off through an athletic scholarship[5]:
- 7% of high school athletes go on to play an NCAA varsity sport in college
- Approximately 2% of high school athletes receive an NCAA athletic scholarship of any amount
- Most athletes awarded scholarships receive approximately $5,000 per year
While the typical scholarship amount varies by division, school, gender, and sport (among other factors), it is important to note that the “average” athletic scholarship is not equivalent to what most student athletes receive. Many sources report various average athletic scholarships to be between $8,000 and $18,000 per year,[6] but it is important to understand that these numbers are skewed by the “head count” sports that stipulate full-rides.[7] These six sports’ full-ride scholarships (men’s and women’s basketball, FBS football, and women’s gymnastics, tennis, and volleyball – all at the DI level) disproportionately drive up that average number, despite only constituting a small minority of all scholarships offered. Therefore, it is more realistic (for those few who receive any athletic scholarship) to consider the scholarship amount that a student athlete is most likely to receive, which is estimated to be approximately $5,000.
The overwhelming majority of athletes going on to play sports in college will still have to pay the full cost of tuition, and the average “two-percenter” receiving a scholarship will still face annual costs of $5,662 (assuming the student receives the $5,000 scholarship in each of the four years, which is not guaranteed). This means that in addition to the $38,196 parents must earn over the nine-year period (to cover the $29,250 in youth sports costs), they must earn $29,576 in pre-tax salary or wages to pay the $22,648 over the four college years, which amounts to a total cost of $67,772 pre-tax. For the average student, who receives no athletic scholarship, the four-year college tuition cost would be $42,648 or $55,692 pre-tax and when added to the $38,196 amount for youth sports, the pre-tax total becomes $93,888.
Since most students pay for college with student loans, the added costs of servicing such debt should also be considered when budgeting for youth sports and college attendance. Assuming parents were willing and able to contribute to the student’s college tuition cost the same after-tax $3,250 they had been putting towards their child’s private youth sports costs each year, the student would require approximately $29,648 in student loans to cover their four years of college tuition. Most student loans carry annual interest of 6%[8] which begins accruing immediately and if the student were to take out a loan of $7,412 at the start of each school year, he would graduate with approximately $34,370 in student loans (assuming he graduated in four years, which only 41% of bachelor’s degree-seeking students do[9]).
When using the average starting salary of a recent Bachelor’s degree graduate from a public university, $59,239,[10] and a Standard Repayment Plan for his student loans, the graduate would pay approximately $382 per month for 10 years for a total of $45,840 after-tax. On the other hand, if the graduate were to opt to start with the lowest monthly payment, likely through an Extended Graduated Repayment Plan, he would begin by paying an estimated $172 per month with gradual increases until he pays off his total student debt, a whopping $72,292 after-tax, 25 years after graduation.[11]
Alternatively, if over the same nine-year period of youth sports, a parent were to contribute $3,250 each year to a 529 Plan (for a total of $29,250) the account value[12] would be approximately $41,653 by the time the first college payment came due.[13]
If the parent were to use the 529 Plan funds to pay the child’s first year’s college tuition in full prior to the start of the year, $30,991 would remain in the account, and since those 529 Plan funds would continue to earn interest, the total available funds would increase to $33,160 by the time the child’s second-year payment came due.
After paying for the second year, $22,498 would remain, and after generating interest through the year would leave $24,073 available to pay for the third year.
After paying for the third year, $13,411 would remain, which after generating interest through that third year would leave $14,350 to pay for the final year.
After making the final payment of $10,662, $3,688 would remain and could be used for books, supplies, computers, room and board, or other college-related expenses.
Unlike his counterpart who took out student loans to cover the cost of college tuition and is now strapped with student debt for the next 10 to 25 years, our 529 Plan beneficiary graduates college with no student debt from college tuition and has more financial flexibility to invest in his future, such as opening an interest-accruing retirement account or buying a house.
Many parents believe that a college degree is an integral step for their child to build a successful adulthood, and some parents have come to believe that the pursuit of a college athletic scholarship is a realistic pathway to that degree. However, the statistics clearly demonstrate that if a child is fortunate enough to have the opportunity to play a collegiate sport, it is very likely they or their parents will also need to be able to pay for college. Given the long-term financial impact, it is wiser to plan for college costs early—without relying on the unpredictable promise of athletic scholarships.
[1] https://www.sportsdestinations.com/management/economics/sports-parents-survey-16532
[2] All tax calculations assume a tax rate consisting of 12% federal, 3.77% state, and 7.65% FICA taxes. Tax rates can vary based on your tax situation and where you reside.
[3] https://www.usnews.com/education/best-colleges/paying-for-college/articles/paying-for-college-infographic
[4] A 2018 survey by the Aspen Institute and University of Texas showed that high school athletes on average began specializing in their primary sport as young as 10
[5] https://ncaaorg.s3.amazonaws.com/compliance/recruiting/NCAA_RecruitingFactSheet.pdf
[6] https://scholarshipstats.com/average-per-athlete
[7] https://www.ncsasports.org/blog/athletic-scholarships-head-count-versus-equivalency#:~:text=Head%20count%20sports%20are%20those,tennis%2C%20volleyball%2C%20and%20gymnastics
[8] https://educationdata.org/average-student-loan-interest-rate. Student loans generally begin accruing interest immediately; only subsidized federal loans carry no interest until a student is out of school. Most private loans begin accruing interest immediately, though payments may or may not be due until the student leaves school.
[9] https://nces.ed.gov/programs/raceindicators/indicator_red.asp
[10] https://www.naceweb.org/job-market/graduate-outcomes/first-destination/class-of-2022/interactive-dashboard
[11] https://studentaid.gov/loan-simulator/
[12] Assuming an average annual return of 7%
[13] The account’s $12,403 of earned interest, which is not taxable, is equivalent to an additional $16,196 in the parent’s pre-tax salary or wages.
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