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The U.S. Department of Education has fined a Michigan college $2.5 million for years of “substantial misrepresentation” of career outcomes.
The department said in a news release on Tuesday that its investigation of Baker College found that the institution’s misrepresentations “could harm students, who may reasonably rely on this information when considering their higher education options and potential outcomes.”
The federal review was launched following a joint investigation by ProPublica and the Detroit Free Press in 2022 that detailed the college’s low graduation rates and the heavy debt that many students shoulder. For decades, the college promoted a near-100% employment rate, which, the investigation found, was based on shaky, self-reported data. The nonprofit college regularly spent more on marketing than on financial aid, and experts identified conflicts of interest in its governance structure.
In 2023, the news organizations — along with The Chronicle of Higher Education — reported on growing financial problems at the institution.
As part of a settlement, the college agreed to make no misrepresentations in the future, provide the department with its marketing materials for review over a period of three years and tell current students and employees about how they can submit complaints or information to the department about alleged misconduct.
President Jacqui Spicer said in a statement that the college maintains that it did not commit any misrepresentations and that the settlement contains no admission of wrongdoing. The findings “did not assert the College provided false information, as part of our marketing and recruitment data,” she said, but rather instances “in which our materials had what the DOE viewed as insufficient background or explanation.”
“Baker College is committed to continuous improvement and meeting and exceeding DOE’s expectations and has already taken steps consistent with that commitment,” Spicer said in the statement.
Dan Nowaczyk, a 2016 graduate from Baker’s now-closed Flint campus, cheered news of the penalty and settlement.
“I hope it’s something that can help their administration take a step back and analyze what went wrong and fix it,” Nowaczyk said in a text message. “Although they’re being fined for this, I wish that something more was done to help shield the people who were exploited by this false advertising. But I do think it’s a good step to show that the DoE takes these things seriously.”
Nowaczyk was among the former students who previously told reporters about their troubling experiences at Baker, including some who said they didn’t realize they’d have to pay back their loans.
Another former student said he wished the department had gone further.
“My first thought is that I am honestly shocked they are allowed to remain open and accredited. If they were able to lie like this before, they will absolutely do it again,” Bart Bechtel said in a text message.
A Baker graduate, Bechtel said he took out more than $40,000 in student loans for an online associate degree. “My second thought is that it sucks. I still owe $5,000 remaining on a $16,000 loan because of those liars.”
Kevin, a graduate of Baker’s Flint campus who asked that his last name not be used, agreed. “This seems like a slap on the wrist,” he said.
“From what I can see, there’s no restitution for students,” he added. “They should be losing accreditation. But that’s not up to the Department of Education. That’s up to the Higher Learning Commission, which may very well happen down the road.”
The HLC is the private accreditation agency that monitors Baker. It was unable to be immediately reached for comment.
The original investigation by the media organizations found that 10 years after enrolling, fewer than half of former Baker students made more than $28,000 a year, the lowest rate among colleges of its kind in Michigan, according to federal data.
The settlement comes in the waning days of the Biden administration, which had promised to crack down on deceptive advertising by colleges, particularly around outcomes. Many experts have said they are worried these types of investigations will disappear under the incoming Trump administration.
The investigation, conducted by the department’s Office of Federal Student Aid, found that:
“This settlement demonstrates the department’s ongoing commitment to enforcing higher education laws and regulations and protecting students and taxpayers,” the department said in its announcement.
In a 2023 message to the campus community, responding to reporting by the news outlets, Baker noted that “numerous in-state and out-of-state colleges and universities engage in marketing activities in Michigan; Baker College is not unique.”
Baker was founded as a for-profit business college in Flint, before converting to nonprofit status in 1977. It grew rapidly, becoming an early adopter of online learning and opening multiple campuses. It was once the largest private nonprofit college in Michigan.
The growth made for a healthy balance sheet. At the end of the 2013-14 academic year, Baker was bringing in $219 million in revenue and had $226 million in expenses. But by the end of the 2022-23 year, revenue was $58 million and expenses were $93 million. From a high of about 45,000 students in 2011-12, enrollment is now about 4,000.
Baker, however, still holds an endowment of about $362 million, according to its 2023 tax filing. Given that, Cleamon Moorer Jr., a former administrator and faculty member, wondered about the impact of the fine. “$2.5 million, out of a $300 million endowment — I’m not sure how punitive that is for an organization of its size,” he said.
Baker is in the midst of a radical shift in its target market, closing campuses in historically industrial places like Flint and Allen Park and building a new one in the more well-off suburb of Royal Oak.
But many students said Baker’s growth came from deceptive practices, and they filed complaints with several agencies, including the Department of Education. About 60 complaints were received by the Federal Trade Commission between 2016 and mid-2023, ProPublica and The Chronicle previously reported. Between January 2021 and June 2023, records from the Department of Education show that 500 borrower defense applications, claiming deceptive practices, were filed against Baker, an unusually high number for a nonprofit school.
Among the complaints collected by the FTC in 2022 was one from a student who wrote: “Baker College is a supposed non-profit institution, but they have made false claims about their employability of graduates, finances, and programs.”
Another wrote: “I was lured into a sense that I would be attending a college that valued their students, only to learn that they valued my financial asset to the college and not my education. I feel that I have been deceived and used for their financial gain.”
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