Capella University to repay up to $588,000 in loan money

Minneapolis-based Capella University will need to repay up to $588,000 in student loan money after a federal audit revealed an accounting discrepancy that requires the online school to pay money back to lenders.

Capella officials acknowledge the for-profit school mistakenly held onto some federal loan money. But they say it's far less than the $588,000 that federal inspectors claim.

The discrepancy revolves around the date the school determines a student has dropped a course.

Capella President Steve Shank said the audit inspectors are making an estimate covering several years.

"In a traditional classroom where the student physically walks in the door this information is never known," Shank said. "We have made determinations they're just arguing as to the point in time we made the determination -- two weeks into the semester as opposed to 30 days into the semester. That's really what this issue is about."

Shank said Capella is challenging the audit numbers. He says repaying the amount would not create a financial hardship for the school.

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