I think it's fair to pay these athletes a little bit more, at least to cover the true cost of attendance. These kids should be able to pay for the occasional pizza or plane ticket home, plus a little folding money. My scholarship refund after tuition was more than these guys get in stipends, and I didn't really have to do anything for it. However, I can't really get around the problem of completely opening it up to the free market. We already have that, it's called professional sports. Then there are the problems with title ix. TO WIT, I don't really think it's fair that these guys have to do media and advertising for the university, yet they don't get compensated for it. A potential way to get the athletes a little more money whilst avoiding title ix would be to compensate athletes for media and advertising. The rates of compensation would be standardized to minimize the "rich get richer" effect. Coaches could award press conference appearances based on certain metrics in order to promote competition.
I don't think this next idea would work, but it would undermine the "but they already get a free ride" argument. What if a player had the choice to either be on scholarship, such as it is now, OR to walk on, pay his own way, and retain the rights to certain types of free market compensation?