A startup founder who sold his company to a student loan giant now alleges the acquirer is illegally selling the data of 5 million students, including minors, and fired him for objecting.
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Scholly founder says Sallie Mae sells data on 5 million students
Christopher Gray, founder of the scholarship app Scholly, filed a whistleblower lawsuit against Sallie Mae, alleging the student loan company is using a non-bank subsidiary to illegally sell the personal data of 5 million users after acquiring his company in 2023. The suit claims Gray was wrongfully terminated for raising concerns over the practice.
“I sold Scholly to a regulated bank because I believed it would protect the students who trusted us,” Gray said in an interview with 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.”
The lawsuit, filed in Delaware Superior Court alongside a complaint to the Securities and Exchange Commission, claims Sallie Mae is selling sensitive user data including age, race, gender, and financial status. The 2023 acquisition gave Sallie Mae access to 5 million student profiles gathered by the popular scholarship-matching service. Sallie Mae denies the allegations, stating it will "vigorously defend" itself against claims it calls "without merit."
The case highlights a growing tension in tech acquisitions where a founder's mission clashes with the acquirer's data monetization strategy. If the allegations are proven, Sallie Mae could face significant regulatory penalties and reputational damage, compounding a history of legal troubles that includes a $60 million settlement with the Department of Justice over interest overcharges to service members.
The Alleged Scheme
Gray’s lawsuit alleges that about a year after the July 2023 acquisition, the dynamic shifted. In July 2024, Sallie Mae laid off the Scholly founding team. Gray claims that during this period, he became aware of executive discussions to sell Scholly’s user data. After he voiced objections, he was fired before a scheduled meeting with Sallie Mae's CEO, an act the lawsuit frames as direct retaliation.
The complaint contends that Sallie Mae established a subsidiary, SLM Education Services, LLC, which operates the website Sallie.com, to execute the data sales. This structure, Gray alleges, is a deliberate scheme to circumvent the stricter federal data-privacy regulations that govern Sallie Mae’s banking arm. The privacy policy for Sallie.com discloses that it sells customer data—including name, email, age, race, and education records—to ad networks, educational institutions, and data resellers.
From 'Shark Tank' to Lawsuit
Christopher Gray’s story was a celebrated entrepreneurial success. After winning $1.3 million in scholarships to attend Drexel University, he created Scholly in 2013 to simplify the search process for others. The app gained national attention after a 2015 appearance on "Shark Tank," securing investment from Lori Greiner and Daymond John and growing to five million users.
The sale to Sallie Mae in 2023 was positioned as a move to expand Scholly's reach and make it free for all users. For Sallie Mae, it was part of a strategy to build a more positive brand centered on financial wellness, moving beyond its core, and often controversial, student lending business. Gray’s lawsuit now suggests that behind the rebranding, the primary asset was the user data itself, which the complaint alleges was used to create Backpack Media, a "first-to-market education media network" to target Gen Z and Gen Alpha audiences.
Sallie Mae's operations have faced regulatory scrutiny before. Its former subsidiary, Navient, reached a $1.85 billion settlement with 39 attorneys general over predatory student loan practices. While Sallie Mae split from Navient in 2014, this new lawsuit puts its own data handling and corporate governance practices under a powerful microscope, with the outcome to be decided in court and by the SEC.
This article is for informational purposes only and does not constitute investment advice.
[1] Scholly and Path Founder Files Whistleblower Lawsuit Against Sallie Mae, Alleging the Company Is Using a Shell Company to Sell Millions of Students' Data[2] The founder of Scholly sold his scholarship app to Sallie Mae. He says they fired him for asking why they were selling students’ data.[3] Founder of Shark Tank-backed startup Scholly sues his acquirer Sallie Mae[4] Scholly founder sues Sallie Mae over firing, data sale claims
