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“and school” – what does this really mean? I am asking questions on (1) amounts, (2) inflation and (3) taxes.

When a player moving directly from high school to college receives a scholarship (either athletic or academic or based upon need), the amount of the scholarship is untaxed – therefore the entire face amount of the scholarship goes to reduce the family’s college contribution dollar for dollar.

On the other hand, I am confused about the “and school” portion of a professional offer and have several questions.

First, is the amount of the “and school” portion a “maximum amount” per year. In other words, does the high school player need to know which type of college he wants to attend in the future and negotiate for that amount (i.e., state school v. expensive private school)?

Second, in reality, since you are bound to the initial pro contract for a number of years, a player’s earliest opportunity to enter full time college (assuming that the player’s pro baseball career does not flourish for any number of reasons) will be 5 years into the future. During that period, the cost of attendance will have increased (probably in the neighborhood of 20 – 25%). Is this increase in the COA automatically covered by the “and school” portion of the contract standard, negotiated with the club, or not covered?

Third, in the move directly from high school to college scenario, the scholarship portion (whether academic, academic or financially based) is not taxable. It is my understanding that the “and school” portion of a pro contract is taxable (because it is wages). With a high cost college, the amount of taxable income needed to pay for college would push the player into a marginal federal tax rate of over 20%.

So, to pay for a 50k COA, the “w-2” would need to be almost 65k+/- (7.5% for FICA/Medicare, 25% marginal rate (roughly 10k in federal and 1k in state income taxes)). If the “and school” portion does not cover those taxes (meaning the club pays 50k total), the player would need to come up with 15k+/- to attend that school. Four years of that expense would basically eat away over 100k of any initial signing bonus (because the initial signing bonus is taxable).

Here is the third question: Does the “and school” portion of the contract cover those taxes and leave a “net” amount which completely covers the COA? (Note: in a high cost school, assuming 25% inflation over 5 years, and assuming the drafting club pays taxes, the “and school” portion of the contract means a potential payment by the club to the college of up to 360k+/-. Yes, I realize that very little “and school” dollars are actually paid out; but that is an individual decision and I am not concerned about that aspect right now.)

Fourth, there is interaction between the “incentive bonus plan” and the “college scholarship plan.” Basically a payment from one reduces the amounts payable from the other. The end result could mean that the former player (now finished with his pro career), has tapped into the college money and is now lacking the $$ to pay for his college. Are the interaction/amounts of the two plans negotiable?
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in my son's case, the school money was to finish 2 more yr at the same school. i believe you would need to do some serious negotiating to get 4 yrs paid at say harvard. as with everything cost will go up, that wasn't part of son's deal.

i believe the check is sent to the school, but can't say for sure.

as far as the incentive bonus goes, it struck me funny. these are from 2006 i think it was, from high A to AA- $1000 from AA to AAA= $1500 from AAA to mlb $2000. you need to be at the next level for 90 day's. any extra money milb players get is great, but 90 day's in the bigs is worth about 90 grand. the extra 2000 would come in handy at AAA.

most everything is negotiable, but the higher up on the totem pole, the more you have to bargain with. i would say all you have to do is ask, the most they can say is no. with a college scholarship in hand you have something to play against.

i'll also add some of these things are ironed out a little bit before the draft, they want to make sure you sign if drafted.
20dad is correct, if the money goes to the school from the fund no taxes, if to you, taxes but I do beleive that amount is reported to the IRS. Not sure of that.
He is also right in stating that unless they really want to sign you, don't expect 4 years at the school of your choice, regardless of where the player is heading, but then again that is something that is negotiable. Not sure if inflation is covered, but remember they want to give you as little as they can.
My player was given more than he needed to finish 32 credits, but with inflation, the loss under the bonus incentive plan he has had to put money aside so that he can cover tuition without loans. The money given did not cover living expenses. You better assume that your player will have to work and attend college after he leaves pro ball unless you can support him later on. If he is lucky to get some time in on the MLB level, that will help.

If you are a former player, some schools have funds available to help, but there are stipulations as to time frames, they do want you to graduate and will do whatever they can to help.

All teams do things differently, one team wanting to draft son out of HS would only give in state tuition, not what his scholarship was worth in South Carolina.

If this is something you need to seriously consider if the player is going to sign out of HS, go to college first and get some time in the classroom, tehy will pay you going back to that school to finish, even at expensive private schools. JMO.
Depending how much a team may want your son you might be surprised how much the team will be willing to give up in the "scholarship" negotiations.

Remember that a very low percentage of the players negotiating the "scholarship" portion of the contract actually use it. (I have seen figures in the 4% range) Because of this I think many ML teams look at the scholarship program as an inexpensive add on to help get the deal done.

Another thing to consider is what level of college scholarship commitment the player has? I would imagine the higher the scholarship the bigger the bargaining chip you have. In our case we factored the total estimated four year COA at the school he had his NLI with then added 20% for inflation. While it took months to negotiate the bonus, the school part lasted about 20 minutes.
Last edited by jerseydad

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