▼ Summary
– Chris Gray sold his scholarship search app Scholly to Sallie Mae in 2023 and is now suing for wrongful termination, alleging the company sells user data, including on minors, without proper consent.
– Sallie Mae acquired Scholly in July 2023, making Gray a vice president, but he claims the company laid off his co-founders and fired him a year later when he raised data privacy concerns.
– Gray alleges Sallie Mae uses a non-bank subsidiary called SLM Education Services, operating Sallie.com, to sell Scholly user data—such as age, race, and financial need—to third parties like universities and advertisers.
– Sallie Mae denied the allegations as “without merit” and declined to comment on its data privacy practices, while Gray filed a lawsuit in Delaware Superior Court and a whistleblower complaint with the SEC.
– Gray, who grew up low-income and won $1.3 million in scholarships, originally created Scholly to centralize scholarship searches and made it free after a Shark Tank appearance, but now says the sale betrayed student trust.
When Chris Gray sold his Shark Tank-backed scholarship search startup Scholly to Sallie Mae in 2023, he believed he was securing the future of a mission-driven company. Now, he is suing the student loan giant for wrongful termination, and alleging it is selling personal data collected by his app, including information on minors, without properly informing users.
Gray co-founded the company a decade ago to help students locate college scholarships that were going unclaimed. Within two years, after appearing on the show, he secured investments from sharks Daymond John and Lori Greiner. The acquisition made him one of the few Black venture-backed fintech founders to successfully exit their company, even as some critics accused him of “selling out.” At the time, he said, “I think being one of the first Black tech companies to get acquired by a bank, that’s really a big achievement.”
He took a vice president role at Sallie Mae and expected to settle in comfortably, helping scale Scholly and making it free to use, he told TechCrunch in an exclusive interview. What happened next is laid out in a lawsuit filed in Delaware Superior Court and a whistleblower complaint submitted to the Securities and Exchange Commission, both filed earlier this month.
Gray alleges that Sallie Mae laid off his employees, including his co-founders, and then broke promises not to sell user data, according to a TechCrunch review of the filings. He claims he was fired a year after the acquisition when he tried to raise concerns about data privacy issues. The suit seeks backpay, punitive damages, and legal costs.
Before agreeing to the sale, Gray believed Sallie Mae, as a federally regulated financial institution, would be barred from disclosing or selling non-public personal information about Scholly customers. Now he alleges his acquirer circumvented those regulations by placing Scholly into a subsidiary that sells data, including age, gender, race, and financial need indicators, to third parties like universities and advertisers, potentially without students’ full awareness.
“I sold Scholly to a regulated bank because I believed it would protect the students who trusted us,” Gray told TechCrunch. “Instead, I watched the company build a non-bank subsidiary to do things the bank itself can’t legally do: sell student data. That’s not the company I thought I was joining.”
Sallie Mae denied the allegations, calling them “without merit,” and declined to answer questions about its data privacy practices. “While we don’t comment on pending litigation, it’s unfortunate a former employee is making false accusations about our company following his departure nearly two years ago,” said Rick Castellano, the company’s vice president of corporate communications, in an email. Asked which specific accusations were “false,” Castellano declined to comment.
Gray grew up low-income in Birmingham, Alabama, with a single mother and two siblings. He felt the barriers to higher education were “real and immediate” for someone like him. Beyond the cost, he lacked access to information to make proper decisions about where to go and how to afford it, a pressure that intensified after his mother lost her job in the 2008 recession.
“That experience shaped how I thought about the scholarship system later,” he recalled, saying he began to view education and scholarship as “a problem of access rather than a problem of merit.” As a teenager, he found the scholarship application process fragmented and inefficient. There was no centralized search, and when he found a website with listings, there were thousands but no reliable way to filter for eligibility. Scams and outdated listings persisted.
Still, he applied to about 75 scholarships over seven months using public computers and the internet at the library, winning around $1.3 million in scholarship funding, including from the Bill and Melinda Gates Foundation and the Coca-Cola Scholars Foundation. He studied economics and entrepreneurship at Drexel University and met students facing similar roadblocks. “Students kept asking for help finding scholarships,” he told TechCrunch. “The funding existed with hundreds of millions of dollars unclaimed each year, but the search process was broken.”
He began mapping out eight core criteria that determined scholarship eligibility: age, location, major, GPA, race, gender, field of study, and financial need. “That became the foundation of Scholly’s matching algorithm,” he said. During his senior year, alongside Nick Pirollo and Bryson Alef, whom he met as Coca-Cola Scholars, he officially launched Scholly in 2013. For just $0.99 a month, students could use the platform and filter by eligibility. “That price kept the business sustainable without having to sell data or run ads,” he said.
Scholly switched to a freemium model after Gray pitched it on Shark Tank, sparking what one host called the “worst fight in Shark Tank history.” Scholly grew to 5 million users and generated more than $30 million in cumulative revenue, Gray said. In March 2023, Sallie Mae’s corporate development team reached out. The bank had just bought the scholarship organization Nitro College a year prior and was moving further into the scholarship and college-planning space. “It was a natural fit,” Gray said.
Sallie Mae bought Scholly in July 2023, bringing Gray and his co-founders on as employees and making Gray a vice president of product management. CEO Jon Witter said the acquisition “allows us to harness and build on Scholly’s innovative technology to unlock future strategic growth opportunities” and promised to “make Scholly free for all students, families, and other users.”
For Gray, the canary in the coal mine came one year after the acquisition. He alleges in the suit that Sallie Mae laid off the Scholly founding team, including his co-founders, in July 2024. Around the same time, he claims he heard executives discuss plans for selling Scholly user data in meetings. He alleges executives told him his position was safe, but when he raised further concerns, he was fired before a scheduled meeting with CEO Jon Witter where he planned to discuss the issues.
After his departure, around December 2024, Sallie Mae launched Sallie.com, described as an “education solutions company,” which became home to the Scholly platform. It is separate from the Sallie Mae website. The Sallie.com website says it is owned by an entity called SLM Education Services, LLC. Gray contends in his lawsuit and whistleblower complaint that Sallie Mae uses SLM Education Services to sell personal data collected by Scholly, since it is not a closely regulated financial services company like the Sallie Mae banking arm.
Sallie.com’s privacy policy discloses 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 data resellers. Sallie Mae also pays Sallie “for the referral of student loan customers,” according to the Sallie.com “About” page. Gray argues that the Sallie.com website may be easily confused with the official Sallie Mae site due to similar layouts and “sallie” logos, increasing the risk that students hand over personal data to what they believe to be a bank.
The suit also alleges that Sallie Mae used Scholly user data to create Backpack Media in March, which it bills 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 press release. Castellano declined to comment on Backpack Media’s data sources.
This is not the first time a Sallie Mae-affiliated company has faced accusations of deceptive behavior. Navient, which split from Sallie Mae in 2014, has faced restitution orders from the FDIC, Department of Justice, and Department of Education for overcharges. It was sued by the CFPB and reached a $1.85 billion settlement with 39 attorneys general over what they described as predatory student loans.
Gray said he knew of these past legal issues but does not regret the sale of Scholly, as it made the platform free for every student. In fact, he said he would make the same decision to sell all over again. “But I’d also raise the same concerns again,” he said. “Because I believe we should live in a system where an executive can speak up and change the course of a company in line with the law and fair business practices.”
(Source: TechCrunch)
