Capella University Student Loan Forgiveness: How It Works

If you attended Capella University and took out federal student loans, you may qualify for loan forgiveness through the Borrower Defense to Repayment Program.

Capella is one of the schools listed in the Sweet v. McMahon class-action settlement, and the Department of Education has received approximately 6,770 borrower defense applications from former Capella students alleging that the school misrepresented how long programs would take to complete, how much they would cost, and what career outcomes graduates could expect.

Related: For-Profit College Student Loan Forgiveness List

Misrepresented program completion time. Borrower defense claims against Capella allege the school misrepresented how long degree programs — particularly doctoral programs — would take to complete.

A class action lawsuit, Wright v. Capella Education Company, filed in 2018 in the U.S. District Court for the District of Minnesota, alleged that Capella told prospective doctoral students they could finish their programs within specific timeframes that turned out to be unrealistic. Students who enrolled expecting to finish a doctoral program in a few years found themselves enrolled far longer.

Understated the true cost of attendance. Because Capella’s programs took longer than advertised, total costs far exceeded what students were led to expect at enrollment. Students took out more loans than they planned for, often tens of thousands of dollars more, to cover the additional quarters and years needed to complete their degrees.

Promised career outcomes that did not materialize. Some borrower defense claims allege Capella misrepresented the career advancement opportunities its degrees would provide. Students who enrolled to improve their job prospects or qualify for promotions found the degree did not deliver the career outcomes Capella’s marketing suggested.

Capella settled the Wright class action. The Wright v. Capella lawsuit settled in April 2022. The specific terms of the settlement are not publicly available. The lawsuit was separate from the borrower defense process — the settlement resolved the class action claims but did not affect borrowers’ ability to file individual borrower defense applications.

Capella is owned by Strategic Education Inc. Capella University merged with Strayer University in 2018 under Strategic Education Inc. Capella continues to operate and enroll students.

The Department of Education notified Capella in January 2024 of approximately 6,700 borrower defense applications filed between June 23 and November 15, 2022. Capella responded to each application individually, contesting the claims.

Capella also responded to approximately 500 earlier applications referenced in a 2021 Department of Education letter tied to the Wright lawsuit. The Department of Education has not communicated with Capella about those earlier claims since then.

Sweet v. McMahon settlement. Capella University is on the Sweet v. McMahon class action settlement school list (Exhibit C), which covers more than 150 schools. If you filed a borrower defense application before June 22, 2022, your claim falls under the settlement’s automatic relief provisions. Approved claims receive full loan discharge, a refund of amounts previously paid on the discharged loans, and credit reporting corrections.

If you filed between June 23 and November 15, 2022, you are a “post-class” applicant. The settlement required the Department of Education to issue decisions on post-class Exhibit C applications by January 28, 2026. That deadline passed without the department adjudicating most of these claims.

Post-class Capella applicants are now entitled to Full Settlement Relief — the same discharge, refund, and credit correction package. The department sent eligibility notices to post-class Exhibit C borrowers on March 30, 2026, and has until March 30, 2027 to deliver the relief.

Individual borrower defense applications. Outside the Sweet settlement framework, you can file an individual borrower defense application describing how Capella’s misrepresentations affected your decision to enroll. The Department of Education reviews these applications on a case-by-case basis. There has been no blanket group discharge for Capella, and no publicly confirmed individual approvals outside the Sweet settlement.

If your application is approved, you receive full loan discharge and a refund of amounts paid on the discharged loans. The department is currently adjudicating individual borrower defense claims under the 2016 regulatory framework because the 2022 borrower defense regulations were enjoined by the Fifth Circuit in August 2023.

There is no FTC settlement for Capella University. If you have seen references to a Capella FTC settlement, that information is incorrect. The Federal Trade Commission has not brought an enforcement action against Capella.

The confusion likely comes from the FTC’s actions against other for-profit schools — the FTC reached a $100 million settlement with DeVry University and a $191 million judgment against the University of Phoenix, and Capella’s name sometimes appears alongside those schools on borrower defense lists. The only legal pathway for Capella loan forgiveness is borrower defense to repayment, either through the Sweet v. McMahon settlement or through an individual application to the Department of Education.

Any program level. Borrower defense claims against Capella are not limited to doctoral students. While the Wright class action focused on doctoral program completion times, master’s and bachelor’s students who experienced similar misrepresentations about time to completion, total cost, or career outcomes can file borrower defense applications on the same basis.

Online students. Capella operates primarily online. There is no requirement that you attended a physical campus to file a borrower defense claim.

Enrollment dates. There is no specific enrollment window that limits your eligibility. Unlike schools such as DeVry, where the Department of Education’s misconduct finding covers a defined period (2008–2015), Capella has no institutional finding with set dates. Any former Capella student who experienced misrepresentations about program length, cost, or career outcomes can file.

That said, if your borrower defense application was filed between June 23 and November 15, 2022, you fall under the Sweet v. McMahon post-class provisions and are entitled to Full Settlement Relief.

Loan type. Federal Direct Loans qualify for borrower defense discharge. If you have older FFEL loans from Capella, you need to consolidate them into a Direct Consolidation Loan before filing your application. Private student loans are not eligible for borrower defense.

What if you already paid off your loans? You can still file a borrower defense application even if you already paid off your Capella loans. If approved, the Department of Education can refund amounts you previously paid on the discharged loans.

However, without an outstanding balance, there is no loan to place in forbearance during the review, and the practical path to a refund for paid-off Capella loans remains uncertain — the department has not announced any group discharge or institutional finding for Capella that would streamline individual refund claims. There is no FTC settlement or class action recovery fund for Capella.

You file an individual borrower defense application through StudentAid.gov. Capella forgiveness is not automatic — each borrower must submit their own application.

The borrower defense application is the same whether the school is still open or closed — Capella being an operating school does not change the process.

When completing the application, focus on what Capella told you before and during enrollment compared to what actually happened. The strongest applications describe specific misrepresentations — the number of years the school said the program would take versus how long it actually took, the total cost the school quoted versus what you ultimately paid, or the career outcomes the school promised versus your actual experience after graduation.

If Capella’s representations about program length or cost influenced your decision to enroll over other options you were considering, say that.

If you have enrollment agreements, marketing emails, program brochures, financial aid documents, or communications from Capella recruiters or advisors, include them as supporting evidence. Screenshots of program length or cost estimates from the school’s website are especially useful if you still have them.

After you file, the Department of Education places your federal loans in forbearance while it reviews your claim. You do not have to make payments during the review, but interest continues to accrue. Processing times for individual applications outside the Sweet settlement have been long — many borrowers have waited years for decisions.

Our Borrower Defense to Repayment guide walks through the full application process.

March 2026. The Department of Education sent Full Settlement Relief eligibility notices to post-class Exhibit C borrowers, including former Capella students who filed borrower defense applications between June 23 and November 15, 2022. The Ninth Circuit unanimously denied the department’s emergency request to pause the post-class relief deadlines on March 25, 2026. The department has until March 30, 2027 to deliver loan discharges, refunds of prior payments, and credit reporting corrections for these borrowers.

February 2026. The district court denied the Department of Education’s second motion to extend the January 28, 2026 post-class deadline, ruling that no further extension requests would be entertained. This locked in Full Settlement Relief for Exhibit C post-class applicants whose claims were not adjudicated by the deadline.

January 2024. The Department of Education notified Capella of approximately 6,700 borrower defense applications filed between June 23 and November 15, 2022. Strayer University, Capella’s sister school under Strategic Education Inc, received notice of approximately 1,900 applications in the same period.

November 2022. The district court granted final approval of the Sweet v. McMahon settlement, which covers borrower defense applicants at more than 150 schools including Capella.

June 2022. The Sweet v. McMahon settlement was reached, providing automatic presumptive relief for all borrower defense applications filed through June 22, 2022 at listed schools. A post-class window opened for additional filings through November 15, 2022.

April 2022. The Wright v. Capella class action settled. Settlement terms are not publicly available.

April 2021. The Department of Education sent Capella a letter referencing the Wright v. Capella lawsuit and initiating fact-finding for more than 1,000 borrower defense applications alleging misrepresentation of doctoral program completion time.

Related:

• Borrower Defense to Repayment

• For-Profit College Student Loan Forgiveness List

• Sweet v. McMahon Settlement Update