There's another possible solution, too, which for the 95% of post-secondary institutions you've never heard of is either already the status quo or would be a much more economical answer. That solution is to get out of the business of athletics. If you are not a "power 5" program or one of the top NCAA D-I basketball programs, athletics is a money-loser. The UAB debacle provides a pretty good case study in why this is so: there are only a handful of universities that the system will allow to make any money. So what looks like one problem is really two: first, the employee-athletes at the major athletic programs aren't being paid, and they should be. But the flip side of the coin is that many of the same retarded rules that harm those employees are being applied to people playing sports at much smaller programs, where they are not at all profitable and there is essentially zero chance that anyone is ever going to make their career as a major league athlete. That's the second problem.
The solution to the first problem is complex. It starts with paying your employees. But there's more to it than that: something has to be done about the fiction that those employees are fundamentally students. They're not. Scandal after scandal shows every trick and dodge in the book is and will continue to be used to keep functionally illiterate players off the academically ineligible list and on the field. It would be healthier, if these schools insist on keeping their highly profitable athletic programs, to partner with the NBA and NFL (baseball doesn't really have this problem) to transition their status to minor league affiliates. In the process, they could also cut the sanctimonious and absurd NCAA out of the game. No more scandals, no more bullshit. But it's going to take some work to get from here to there.
The solution to the second problem is very simple. For the other 95%, no more NCAA rules (they're designed for the big-money programs to deceive themselves, not for the others). No more TV, period. Not that most of them are ever on TV anyway, except for the one or two games a year they volunteer to be slaughtered by far superior competition to fund the rest of their season (in games which, for no conceivable reason, actually count for both teams!). No more licensing. If they want to sell merchandise, they can sell it at the campus bookstore. Not like any of them are making millions from Amazon or Foot Locker anyway. Above all else, no more "athletic scholarships", a profound contradiction in terms hardly anyone ever ponders long enough to recognize.
That means no more pressure, no more extended seasons, and no more faux students hanging around in hopes of transferring to a big-money program so they can get their shot at the big time. If you want to play intercollegiate sports, fine. But the reason those academic standards that are so low yet somehow impossible for the big guys to meet without cheating exist in the first place is to prevent students who don't have time for a hobby from being distracted from their studies. Raise them, high. If you don't have at least a 3.25, you have no business doing anything but studying. And without the pressure of having to maintain your "athletic scholarship", why should you?
No more games against hopelessly superior competition. You'll play against other teams of full-time students with no funding for fancy uniforms and gleaming locker rooms, at a simple gym or on a field shared with 8 other teams next to a single set of bleachers. High school baseball teams don't play against AA clubs; there's no excuse for pay-for-play in other sports, either. If you can't fund your athletic programs through student fees, they get cut. Simple as that. But stop pretending that "student athletics", a huge money loser and waste of time and energy, is a necessary part of your institutional identity, or that it "builds character". There's nothing wrong with intercollegiate athletics as a hobby, a diversion, another way to network, and a way to stay in shape while you study. But that's all it is. Don't let the tail wag the dog.
Because as bad as the futile aspiration of making a major-league professional club is for the 98% who never will, the small schools (or large schools with small athletic programs) forced to play by the same rules as the big boys are in exactly the same spot. The first step is admitting that you're not competitive and never will be. Once you've done that, a whole world of refreshingly decent options opens up.