Somebody correct me if I’m wrong, but I don’t think redshirts are retroactive except in medical situations. Furthermore if he plays himself into a pro contract why stay? If he continues to play at this level he could be a late round selection or a UFA. If he has his degree and wants to move one to this possibility, then good for him and we should support his choice.
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The only thing that affects eligibility (in regards to using up a year) is participation. How they're listed in the program is largely irrelevant. Bill Curry, his first two years here, never listed redshirts until their senior year. Assuming you redshirted your freshman year under him, you would be listed as a sophomore your second year with "SQ" as your experience level (for "squad") rather than "1VL" for "one varsity letter." If you were here all five years, you were listed as a senior twice (your RS junior and RS senior seasons).
We did that a couple of years and I remember him saying, rather humorously, that he changed it back heading into either the '88 or '89 season because "even I was getting confused looking at our roster."
So hypothetically, if Levi didn't play as a true freshman, he could be redshirted for that year. Unless the NCAA has changed the rules very recently, a school does not have to declare redshirts after every season is through. We would simply inform the NCAA that he has a year of eligibility left, and that's that.
But there is one other thing to consider: I don't know when Levi enrolled in college, but let's say he enrolled the fall of his 18-year-old year, after having graduated high school that past May, like most students do. That triggers his eligibility clock, and he has five years to play beginning that day and ending five years afterward. These guys you see go pro in baseball (like current walk-on TE Cam Stewart) and then come back to football as a 26-year-old, never enrolled in college. They never started their clock. Guys who went into active military service typically don't have to abide by that rule, either; I'm not sure whether there's an exception for military service in the rulebook (there probably is) or whether they're all getting waivers upon return. Point being -- and again, under the caveat that the rules have not changed since the last time I was aware of them -- you can't enroll in college, go two years, drop out, come back a decade later and still have three years eligibility. Not at the FBS level, anyway. In lower divisions, maybe so, and the NAIA is pretty much the Wild West. At the NCAA FBS level, once that clock starts, you have five years to play five -- and I believe you can also start your clock if you enroll in JUCO out of high school as well. There's also something pertaining to religious missionary work (i.e., primarily BYU) but I don't know the particulars.
In Wallace's case, if he has been enrolled five years but waited a year to walk on (again, not saying he did, just saying *IF*), then that year in effect becomes his redshirt year and he can't get it back.
If he's just been on campus four years, he's only played in 2 or 3 of those years, and should be able to utilize his fifth year of eligibility. Scholarship (or lack thereof) doesn't matter. Age doesn't matter. Participation and enrollment window matter.