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I've wondered that same thing before. I imagine the offer would still have to cover 25% in order to meet NCAA rules. However, the coach can probably anwser this question since I'm sure this is more common than expected. Or (and I may be completely wrong about this) the baseball may have to cover the 25% and then if there is money left over from the state that money may be returned to the student to deal with other costs such as transportation.
I almost hesitate to comment on this because on the one hand the rule is very clear, and the rationale for the rule, as described in the proposal that lead to the rule, is also clear. On the other hand, I am aware through PMs, that a couple of colleges are apparently reading the rule differently.

The rule is the soul of brevity:
15.5.4.1 Minimum Equivalency Value. An institution shall provide each counter athletically related and other countable financial aid that is equal to or greater than 25 percent of an equivalency.

Some definitions: A counter is a student who is receiving any aid which counts against the 11.7 equivalencies. An equvalency is the cost of tuition and fees, room and board, and required course-related books.

So, assuming that the state grant is not countable, then the only way I can imagine to read this rule is: If the player receives any countable money, he needs to receive 25% of an equivalency.

But apparently some colleges see it differently.
Firstly, I would try separate in my mind the legality of the offer from the question of whether it is a fair or "lowball" offer. In fact, fair is an elusive concept. A player can only weigh the benefits of one school, program , and offer against those of another. If a different school is offering a better overall package, the problem is solved.

If it should turn out that the offer is not legal, there are some potential ramifications to the player. There would probably be several players in the same situation, and some of those would end up losing their scholarship in order to award others the 25%, assuming the program is fully funded. I suppose that the program could lose scholarships as part of a penalty.

If the player signs a NLI, and the accepted aid agreements is belatedly (e.g. next July) recognized as inappropriate, then there may be an opportunity cost if he wants to attend a different school.

Unless the player wants to attend the school regardless, he should send an email to the NCAA, laying out the exact details of the offer and get a written response concerning the legality.
Rick,
Yes, some of the 25% can be non-athletic aid. However, the crux of the rule is that all of the 25% must be countable aid.

All athletic aid is countable. Some non-athletic aid is countable, and some is not. In the OP, apparently the "state grant" is not countable. The rule says--very clearly--that non-countable aid can't be used to make up part of the 25%.

An implication of the rule (quoted in the 3rd post of this thread) is that a D1 baseball player can either count as 0 equivalencies or 0.25 or more equivalaencies against the institutional limit of 11.7.

If you understand this situation differently, I'd appreciate hearing the justification for that. Perhaps the NCAA is interpreting the rule differetnly than it is written?
You are correct in stating that all of the 25% must be countable aid. I forgot to include the word countable in my explanation.

However, some state grants are countable, while other state grants are non-countable. It depends upon various factors, such as whether the institution plays a role in the awarding of the state grant. For example, if the institution recommended the individual for the grant, it is quite possible that it could be countable.

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