Scholly founder sues Sallie Mae over data privacy and termination

Chris Gray, the founder of the scholarship search platform Scholly, has filed a lawsuit in Delaware against his acquirer, the student loan company Sallie Mae. The lawsuit alleges wrongful termination and claims that Sallie Mae is selling user data without proper consent. Gray, who grew up in Alabama, launched Scholly in 2013 to help students find funding. Sallie Mae acquired the startup in 2023, bringing Gray on as an employee. However, Gray alleges that the company laid off the Scholly founding team in July 2024 and subsequently fired him after he raised concerns about data privacy. In addition to the lawsuit, Gray filed a whistleblower complaint with the SEC (the US securities regulator).

According to the lawsuit, Sallie Mae may be selling student data through a non-bank subsidiary to avoid regulations that govern federally regulated financial institutions. Gray alleges that Sallie Mae transferred Scholly to SLM Education Services, LLC, a subsidiary that launched the website Sallie.com in December 2024. Gray claims that Sallie.com may be easily confused with the official Sallie Mae banking website due to similar layouts and logos. The Sallie.com privacy policy discloses that it sells customer data—including age, race, and gender—to third parties. Gray also alleges that Sallie Mae used this data to launch Backpack Media, an education media network, in March. This data collection stands in contrast to Scholly’s original model; when it launched, it charged a monthly price of $0.99 a month to remain sustainable without selling data, eventually growing to 5 million users and generating more than $30 million in cumulative revenue.

Sallie Mae has denied the allegations. Rick Castellano, vice president of corporate communications for Sallie Mae, stated: “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. We plan to vigorously defend ourselves against these claims which are without merit or substance” The legal dispute has drawn attention to the history of Sallie Mae’s corporate spin-offs. Navient, a company that split from Sallie Mae, previously faced regulatory actions from the FDIC (the US banking regulator) and was sued by the CFPB (the US consumer protection agency), ultimately reaching a $1.85 billion settlement with 39 attorneys general over allegations of predatory student loans.

Why it matters

The lawsuit highlights the tension between startup acquisition and corporate data practices, specifically whether large financial institutions can use non-bank subsidiaries to circumvent privacy regulations.