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Bachelor's Degrees. In 2006, the United States Department of Education, Office of the Inspector General (OIG) began a compliance audit of Capella. OIG focused on the university's policies and procedures concerning the return of Title IV funds as required by Federal Law for students who failed to give official notice that they were withdrawing from the school The OIG found that Capella made accounting mistakes in how it calculated student eligibility for government-subsidized loans, including failing to return all funds disbursed on behalf of students who dropped out before their first day of class. Capella, in a response to the audit, says it recognizes some past shortcomings in its accounting practices and has made changes to ensure that such errors are not repeated.
In 2012, Capella received criticism for its expenditures on marketing, profit, and CEO pay rather than instruction, and its use of aggressive recruiting practices. According to a report issued by former U.S. Senator Tom Harkin for the Senate Education Committee, approximately 79% of the institution's cash flow comes from US government Title IV payments, including Pell grants. The report concluded that Capella's recruiting and student services were better managed than most other for-profit competitors, especially among graduate degree students. The high withdrawal rate among Bachelor's student hopefuls, the over-reliance on part-time instructors, and the high relative marketing budget were cited as potential causes for concern.
In April 2018, Capella students filed a class action suit against the school in Minneapolis. One had begun pursuing a doctor of nursing practice in spring 2014. She said she had been told it would take two years and cost about $35,000. But Capella’s website later said the program takes 30 months, and even that figure was subsequently revised to 39 months. One student said she earned top grades paying $53,000 before Capella assigned her a different instructor. That new instructor then said she’d “have to start all over” on her project. She tried to oppose that decision but finally departed for another school. Another student enrolled in the school in February 2014 in a doctorate of education capstone program advertised to take 36 months. The complaint alleges Capella later claimed the program actually takes 45 months. However fewer than 10 of its students managed to finish within that projected time period. A PhD student in nursing said she earned high grades but made little progress in her dissertation. After paying more than $100,000 in tuition, she dropped out, only 20% of the way toward earning her degree. Minnesota's Office of Higher Education received 71 complaints from Capella students between 2013 and 2016. All other schools combined only generated 146 complaints in the same time period.
 

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