Capella University Lawsuit: Class Actions, Forgiveness, Data Breach

The main Capella University lawsuit is a 2018 federal class action brought by doctoral students who accused the online school of a “bait-and-switch” scheme, promising affordable degrees that could be finished in a few years while creating obstacles that kept students paying tuition far longer. That case settled confidentially in 2022. A second class action filed in 2024 also settled. Separately, thousands of former Capella students are eligible for federal student loan discharge through the nationwide Sweet v. McMahon settlement, which lists Capella among the covered institutions.¹

The 2018 Doctoral Class Action

In April 2018, doctoral students Carolyn Wright of Kansas and Debbra Kennedy of Tennessee sued Capella Education Company and Capella University in the U.S. District Court for the District of Minnesota. The case, No. 18-cv-1062, was assigned to Judge Wilhelmina M. Wright.²

The complaint alleged that Capella advertised doctoral programs as shorter and cheaper than they actually were, then used high faculty turnover, disorganization, inconsistent feedback, and administrative hurdles to prolong students’ enrollment and collect additional tuition.³

Wright, for example, enrolled in a doctor of nursing practice program she was told would take about two years and cost roughly $35,000. The timeline was later extended to 30 months, then to 39. After she had paid $53,000, a new instructor told her she would need to restart her capstone from scratch. Kennedy paid more than $100,000 toward a doctor of education advertised as a three-year program before dropping out.²

The suit brought claims of common-law and statutory fraud, breach of contract, and unjust enrichment. It sought to represent all students nationwide who enrolled and paid tuition from 2006 onward, with subclasses for Kansas and Tennessee residents, and asked for damages, an injunction against the marketing, and disgorgement of profits.⁴ Capella’s spokesperson called the suit “without merit.”²

How the Case Progressed

An amended complaint in August 2018 added plaintiffs from Alabama, Florida, Massachusetts, New York, Ohio, and Pennsylvania. In May 2019, Judge Wright allowed most of the case to move forward but dismissed Wright’s individual fraud claim, finding that Capella’s marketing suggesting a two-year completion window did not amount to a guarantee.⁵

The court eventually dismissed all but one plaintiff. In October 2020, the remaining plaintiff moved to file a second amended complaint adding six new named plaintiffs and additional subclasses, and the court granted that motion in September 2021.⁶ The case was re-captioned Ornelas et al v. Capella University, Inc. et al, and Strategic Education, Inc., Capella’s parent company after a 2018 merger, was added as a defendant.⁷

The 2022 Settlement

The parties reached a confidential settlement effective April 20, 2022. A joint stipulation of dismissal with prejudice followed five days later, and the case was terminated in May 2022.⁶ The dollar amount and terms were never made public. No class recovery fund was established for broader distribution, so students who were not named plaintiffs did not receive payments through the case itself.⁸

The 2024 Der Boghossian Class Action

A second class action, Der Boghossian et al v. Capella University, LLC and Strategic Education, Inc. (Case No. 24-CV-3007), was filed in the U.S. District Court for the Southern District of New York by five named plaintiffs. The parties notified the court on February 12, 2026, that they had reached agreement on all issues, and Judge Valerie Caproni dismissed the case with prejudice the following day.⁹ The specific allegations in the available record are limited.

Loan Forgiveness Through Sweet v. McMahon

The most consequential path to recovery for former Capella students runs through the federal borrower defense to repayment program rather than through the class actions above. Capella is listed as an “Exhibit C” institution in the Sweet v. McMahon settlement (originally Sweet v. Cardona), which covers roughly 150 schools.

Under that settlement, borrowers who filed borrower defense applications on or before June 22, 2022, are eligible for automatic full relief: discharge of covered federal loans, refunds of payments already made, and removal of related negative credit reporting.¹

Borrowers who filed between June 23 and November 15, 2022 are known as “post-class” applicants. The Department of Education was required to decide their claims by January 28, 2026, a deadline Judge William Alsup confirmed in December 2025. When the Department failed to adjudicate the Exhibit C claims by that date, those applicants became entitled to Full Settlement Relief as well. The Department was ordered to notify them by March 29, 2026 and has until March 30, 2027 to deliver the relief.¹⁸

Capella has received roughly 6,750 borrower defense applications overall. In January 2024, the Department notified Capella of about 6,700 post-class applications, sending them in batches of 500 per week. Capella has individually contested each claim.¹⁰ The Department has not initiated any recoupment proceedings against the school, and no individual claims outside the Sweet framework have been publicly confirmed as decided on the merits.⁶

The 2026 Data Breach

A separate matter, unrelated to the tuition and loan lawsuits, is a data breach at Strategic Education, Inc., the parent of both Capella and Strayer. The company said unauthorized actors accessed its servers between February 23 and February 25, 2026, copying files containing names, Social Security numbers, driver’s license numbers, and in some cases passport numbers. The breach was discovered on May 21, 2026.¹¹

State-level filings identified 111,706 confirmed victims across multiple states, with more than 100,000 in Texas alone, affecting individuals associated with Capella, Strayer, the Jack Welch Management Institute, and Hackbright Academy.¹¹ Strategic Education is offering affected individuals one year of complimentary identity monitoring through Kroll.¹² As of early June 2026, no class action lawsuit had been filed over the breach, though law firms were publicly investigating potential claims.

1
Project on Predatory Student Lending. Sweet v. McMahon Class Members
2
Twin Cities Pioneer Press. Class Action Lawsuit Alleges Capella University Lied About Time, Cost of Advanced Degrees
3
ClassAction.org. Class Action: Capella University Doctoral Students Misled, Confused, and Ultimately Cheated Out of Their Money
4
Top Class Actions. Capella University Class Action Says Degree Process Bait and Switch
5
vLex. Wright v. Capella Univ., 18-cv-1062
6
U.S. Securities and Exchange Commission. Strategic Education Inc. SEC Filing – Legal Proceedings
7
GovInfo. Ornelas et al v. Capella University, Inc. et al
8
Tate Esq. Capella University Student Loan Forgiveness
9
Leagle. Der Boghossian et al v. Capella University, LLC and Strategic Education, Inc.
10
U.S. Securities and Exchange Commission. Strategic Education Inc. SEC Filing – Borrower Defense Proceedings
11
TechTimes. Strategic Education Data Breach Exposes SSNs, 111,706 Confirmed Victims
12
California Office of the Attorney General. Strategic Education Inc. Data Breach Notification