Gregg resigned from the Packers in January 1988 and took a pay cut to take over at SMU, his alma mater. He was brought in to revive the Mustang football program after it received the "death penalty" from the NCAA for massive violations of NCAA rules. Though the NCAA had only canceled the 1987 season, school officials later opted to cancel the 1988 season due to fears that fielding a competitive team would be impossible; nearly every letterman from the 1986 squad had transferred elsewhere. Gregg knew that any new coach would be essentially rebuilding the program from scratch, but when acting president William Stalcup asked him to return, he felt he could not refuse.