In the comments we tend to go back and forth with "of course/of course not/won't-someone-think-of-the-childen/what-about-the-other-students", so I thought I'd lay out a specific proposal.
The goal of the proposal is twofold:
First, channel some of the obscene money flowing to athletic departments, the NCAA, and bowl committees to the people who make the money train possible.
Second, avoid the quagmire of trying to determine exactly who deserves what.
1. Lifetime free/reasonable-cost health coverage.
This is obviously of most value to our football players, but one thing student-athletes do more of is get hurt. Some of those injuries can have serious long-term consequences, so give them lifetime coverage for those risks. Whether this is health insurance or actual health coverage can be discussed, but I would imagine health insurance would be the better way to go, as health coverage has geographic limitations that aren't always convenient. This in and of itself would soak up a tremendous amount of the money pouring into collegiate sports and give it back in a way that I contend is fair - student athletes incur more long-term health risks than their fellow students, so giving them a benefit to counteract that risk - and has less of an impact than straight-cash payouts.
This has the further advantage of doing the right thing with regards to our increasing knowledge of the price that our student-athletes pay in terms of long-term brain injuries.
2. Allow athletes to profit from their likenesses. If EASports wants a Michigan QB #16, Denard Robinson gets a cut. Again, other students aren't restricted in such a way, so removing this restriction seems fair.
3. Remove the restriction on outside student benefits (i.e. bagmen and boosters). This restriction doesn't currently exist for other students (or, technically, for high school students not yet subject to the NCAA), and hence is also fair.
The last restriction seems like the most likely to cause havoc, but I have a few counterarguments:
a. Those who believe that the $EC is already deploying bagmen for football and that everyone is doing so for basketball should welcome a leveling of the playing field. This is the "it's already happening, and we're losing a battle that's not worth fighting" argument.
b. Those who think that auctioning off the top talent every year would lead to a totally different football landscape ... well, if you take a look at the top 10 teams each year for the last 10/20/50 years, you will find a strong correlation between the wealthiest universities and the most successful. Put simply, they can pay for facilities and coaching talent, and if they make a mistake they can pay to make it go away anyway. What, exactly, will change?
c. I have no doubt there would be a turbulent few years as people gave "f-you" money to top prospects and people decried "the kids these days", but all it takes is one top target who flames out to get people to realize that throwing giant piles of money at 18-year-old boys to play a sport with a horrific flameout rate is not sustainable. It will stabilize pretty quickly (within about ten years, I think) and the Rashan Garys of the world will get injury insurance money to wear someone's laundry, while the others will get new-car money, and not much will change.
d. This has the benefit of not running afoul of Title IX, as the athletic opportunities aren't changing and the university isn't doing any of the payouts.
e. I am not making the argument that our athletes aren't being compensated. I'm making the argument that they are not being compensated adequately. We cannot make the argument that "Hey, it's a business" when a recruit switches his commit to us or gloat over the Nike deal and say "No, it's amateur hour" when we want to keep our sports the way they are.
f. Aside from the moral arguments around "why shouldn't they get what they can?", Michigan has resources it can deploy more effectively than most, so it's to our benefit.
g. Arguing that we shouldn't pay players because it would change things is, at its core, an old-man-get-off-my-lawn argument. Just because it would change things is not a reason to do something if the problem is bad enough, and I think it is. Particularly in light of the concussion issue.
Argue away :<)