Chris Gray Takes Legal Action Against Sallie Mae Following Scholly Acquisition
Chris Gray, the co-founder of the scholarship search startup Scholly, is suing Sallie Mae after selling his company to the student loan giant in 2023. He alleges wrongful termination and claims that Sallie Mae is improperly selling data collected from users, including minors, without adequate user notification.
Gray co-founded Scholly a decade ago with the intent of simplifying college scholarship searches for students. His appearance on Shark Tank garnered significant attention, leading to investments from Daymond John and Lori Greiner within two years.
Upon the acquisition by Sallie Mae, Gray became one of the few Black founders in the fintech space to exit a venture successfully, despite facing criticism from some quarters for allegedly “selling out.” He regarded the acquisition as a milestone, stating that it represented a significant step for Black tech entrepreneurs.
After the sale, Gray took on a vice president role at Sallie Mae, believing he would be instrumental in scaling Scholly and enhancing its accessibility to users. However, his subsequent lawsuit sheds light on troubling developments within the company.
Filed in Delaware Superior Court, Gray’s suit includes allegations of layoffs among Scholly’s founding team and broken promises regarding data privacy, particularly concerning the sale of user data. He contends that Sallie Mae terminated his employment after he raised concerns about these practices, seeking back pay and punitive damages in response.
Gray claims he operated under the assumption that federal regulations would prevent Sallie Mae from disclosing or selling non-public personal information from Scholly users. However, he now asserts that the company established a subsidiary to bypass these regulations, enabling the sale of sensitive data such as age, gender, and financial need indicators to third parties.
Gray’s Journey from Birmingham to Industry Recognition
Growing up in Birmingham, Alabama, Gray experienced firsthand the barriers to higher education, particularly as a low-income student raised by a single mother. The challenges became more pronounced when his mother lost her job during the 2008 recession, shaping his perspective on educational access and scholarship funding.
As a teenager, Gray found the scholarship application process to be cumbersome and fragmented, lacking a centralized platform. Despite these obstacles, he successfully applied for around 75 scholarships, securing approximately $1.3 million in funding, including awards from the Bill and Melinda Gates Foundation and Coca-Cola Scholars Foundation.
Gray pursued studies in economics and entrepreneurship at Drexel University, where he recognized a recurring need for better scholarship resources among his peers. This insight led him to design a matching algorithm based on core criteria like age, location, and financial need, laying the groundwork for Scholly’s development.
The platform officially launched in 2013, providing students a means to search for scholarships based on eligibility criteria. The service was initially priced at $0.99 per month before transitioning to a freemium model following Gray’s successful pitch on Shark Tank, which garnered significant media attention and investment offers.
In July 2023, Sallie Mae acquired Scholly, with promises of making the service accessible for free to students and families. The acquisition aimed to expand Sallie Mae’s reach in the scholarship and college-planning sector, leading Gray and his co-founders to join the company as employees.
Contentions Arise in the Aftermath of Acquisition
Gray’s legal troubles with Sallie Mae began a year after the acquisition, when he alleges that Sallie Mae laid off the Scholly founding team, including his co-founders. Around the same time, he reportedly overheard discussions regarding selling user data, which he found alarming.
Despite reassurances from Sallie Mae executives about his job security, Gray asserts that he was fired shortly after expressing his concerns about data privacy. Following his departure, Sallie Mae launched a new entity, “Sallie.com,” which he believes is designed to facilitate the sale of Scholly’s user data in a manner that skirts federal regulations.
According to the privacy policy of Sallie.com, the platform markets itself as an “education solutions company” and collects various personal data points, potentially confusing users regarding its affiliation with the more prominent Sallie Mae brand.
Gray alleges that Sallie Mae has utilized Scholly user data to create a new initiative called Backpack Media, which markets itself as an educational media network targeting Gen Z and Generation Alpha. The details surrounding data sourcing for this initiative remain unclear, as Sallie Mae has refrained from providing additional commentary.
The lawsuit highlights a broader concern regarding Sallie Mae’s past associations, including issues faced by Navient, a separate company that emerged from Sallie Mae, which has been subject to legal scrutiny for its practices. Regardless of these challenges, Gray maintains that he does not regret his decision to sell Scholly, as it allowed the platform to become more accessible to students.