Scholly Co-Founder Sues Sallie Mae Over Termination and Alleged Data Practices Following 2023 Acquisition

Chris Gray, the co-founder of scholarship search startup Scholly, filed a lawsuit against Sallie Mae in Delaware Superior Court earlier this month, alleging wrongful termination and the sale of user data collected by his app. Gray also submitted a whistleblower complaint to the Securities and Exchange Commission during the same period.

In the lawsuit, Gray seeks backpay, punitive damages, and legal costs.

The suit stems from Sallie Mae's acquisition of Scholly in July 2023, after the company's corporate development team reached out to Scholly in March 2023. Sallie Mae brought Gray and his co-founders on board as employees, appointing Gray as vice president of product management.

Gray alleges that Sallie Mae laid off the Scholly founding team, including co-founders, in July 2024. He was fired a year after the acquisition, according to the lawsuit. The website owned by an entity called SLM Education Services, LLC, discloses in its privacy policy that it sells customer data including name, phone number, email addresses, age, race, gender, education records, and geolocation data to third parties such as ad networks, educational institutions, brands, and companies dedicated to reselling consumer data.

Sallie Mae also pays the website for the referral of student loan customers, according to the site's About page. Sallie Mae launched Backpack Media, billed as a “first-to-market education media network” that “offers brands efficient, scalable access to highly desirable, hard to reach audiences – Gen Z, Gen Alpha, and those involved in their purchasing decisions,” according to a Sallie Mae press release.

Gray contends Sallie Mae uses the subsidiary to sell data that the regulated bank itself cannot legally disclose.

Gray co-founded Scholly a decade prior to 2023, launching it in 2013 with Nick Pirollo and Bryson Alef. For just $0.99 a month for users to access the platform. Scholly switched to a freemium model after Gray's appearance on Shark Tank, where Daymond John and Lori Greiner invested in the company.

Scholly grew to 5 million users and generated more than $30 million in cumulative revenue, Gray said. He won around $1.3 million in scholarship funding, including from the Bill and Melinda Gates Foundation and the Coca-Cola Scholars Foundation. Gray grew up low-income in Birmingham, Alabama, with a single mother and two siblings, and applied to about 75 scholarships over seven months using public computers at the library.

The bank had just bought the scholarship organization Nitro College a year prior and was trying to move more into the scholarship and college-planning space. Gray believed selling to a regulated bank would protect user data, but he now alleges the company circumvented regulations through subsidiaries.

“I sold Scholly to a regulated bank because I believed it would protect the students who trusted us,” Gray told TechCrunch. ” Sallie Mae denied the allegations, with a company spokesperson stating in an email to TechCrunch that the claims are “without merit” and that the company plans to vigorously defend itself.

The spokesperson declined to specify which accusations were false or to comment on data privacy practices. Gray told TechCrunch he does not regret the sale, as it made Scholly free for users, but he would raise the same concerns again to align with legal and fair business practices.