((a)) ** In general** In the case of any individual—

((1)) who has received a baccalaureate or associate degree in nursing (or an equivalent degree), a diploma in nursing, or a graduate degree in nursing;

((2)) who obtained (A) one or more loans from a loan fund established under subpart II, or (B) any other educational loan for nurse training costs; and

((3)) who enters into an agreement with the Secretary to serve as nurse for a period of not less than two years at a health care facility with a critical shortage of nurses, or in a  accredited school of nursing, as defined by , as nurse faculty;

((b)) ** Manner of payments** The payments described in subsection (a) shall be made by the Secretary as follows:

((1)) Upon completion by the individual for whom the payments are to be made of the first year of the service specified in the agreement entered into with the Secretary under subsection (a), the Secretary shall pay 30 percent of the principal of, and the interest on each loan of such individual described in subsection (a)(2) which is outstanding on the date the individual began such practice.

((2)) Upon completion by that individual of the second year of such service, the Secretary shall pay another 30 percent of the principal of, and the interest on each such loan.

((3)) Upon completion by that individual of a third year of such service, the Secretary shall pay another 25 percent of the principal of, and the interest on each such loan.

((c)) ** Payment by due date** Notwithstanding the requirement of completion of practice specified in subsection (b), the Secretary shall, on or before the due date thereof, pay any loan or loan installment which may fall due within the period of service for which the borrower may receive payments under this subsection, upon the declaration of such borrower, at such times and in such manner as the Secretary may prescribe (and supported by such other evidence as the Secretary may reasonably require), that the borrower is then serving as described by subsection (a)(3), and that the borrower will continue to so serve for the period required (in the absence of this subsection) to entitle the borrower to have made the payments provided by this subsection for such period; except that not more than 85 percent of the principal of any such loan shall be paid pursuant to this subsection.

((d)) ** Scholarship program**

((1)) ** In general** The Secretary shall (for fiscal years 2003 and 2004) and may (for fiscal years thereafter) carry out a program of entering into contracts with eligible individuals under which such individuals agree to serve as nurses for a period of not less than 2 years at a health care facility with a critical shortage of nurses, in consideration of the Federal Government agreeing to provide to the individuals scholarships for attendance at schools of nursing.

((2)) ** Eligible individuals** In this subsection, the term “eligible individual” means an individual who is enrolled or accepted for enrollment as a full-time or part-time student in a school of nursing.

((3)) ** Service requirement**

((A)) ** In general** The Secretary may not enter into a contract with an eligible individual under this subsection unless the individual agrees to serve as a nurse at a health care facility with a critical shortage of nurses for a period of full-time service of not less than 2 years, or for a period of part-time service in accordance with subparagraph (B).

((B)) ** Part-time service** An individual may complete the period of service described in subparagraph (A) on a part-time basis if the individual has a written agreement that—

((i)) is entered into by the facility and the individual and is approved by the Secretary; and

((ii)) provides that the period of obligated service will be extended so that the aggregate amount of service performed will equal the amount of service that would be performed through a period of full-time service of not less than 2 years.

((4)) ** Applicability of certain provisions** The provisions of subpart III of part D of subchapter II shall, except as inconsistent with this section, apply to the program established in paragraph (1) in the same manner and to the same extent as such provisions apply to the National Health Service Corps Scholarship Program established in such subpart.

((e)) ** Preferences regarding participants** In entering into agreements under subsection (a) or (d), the Secretary shall give preference to qualified applicants with the greatest financial need.

((f)) ** Condition of agreement** The Secretary may make payments under subsection (a) on behalf of an individual only if the agreement under such subsection provides that section 298b–7(c)  of this title is applicable to the individual.1

((g)) ** Breach of agreement**

((1)) ** In general** In the case of any program under this section under which an individual makes an agreement to provide health services for a period of time in accordance with such program in consideration of receiving an award of Federal funds regarding education as a nurse (including an award for the repayment of loans), the following applies if the agreement provides that this subsection is applicable:

((A)) In the case of a program under this section that makes an award of Federal funds for attending an accredited program of nursing (in this section referred to as a “nursing program”), the individual is liable to the Federal Government for the amount of such award (including amounts provided for expenses related to such attendance), and for interest on such amount at the maximum legal prevailing rate, if the individual—

((i)) fails to maintain an acceptable level of academic standing in the nursing program (as indicated by the program in accordance with requirements established by the Secretary);

((ii)) is dismissed from the nursing program for disciplinary reasons; or

((iii)) voluntarily terminates the nursing program.

((B)) The individual is liable to the Federal Government for the amount of such award (including amounts provided for expenses related to such attendance), and for interest on such amount at the maximum legal prevailing rate, if the individual fails to provide health services in accordance with the program under this section for the period of time applicable under the program.

((2)) ** Waiver or suspension of liability** In the case of an individual or health facility making an agreement for purposes of paragraph (1), the Secretary shall provide for the waiver or suspension of liability under such subsection if compliance by the individual or the health facility, as the case may be, with the agreements involved is impossible, or would involve extreme hardship to the individual or facility, and if enforcement of the agreements with respect to the individual or facility would be unconscionable.

((3)) ** Date certain for recovery** Subject to paragraph (2), any amount that the Federal Government is entitled to recover under paragraph (1) shall be paid to the United States not later than the expiration of the 3-year period beginning on the date the United States becomes so entitled.

((4)) ** Availability** Amounts recovered under paragraph (1) with respect to a program under this section shall be available for the purposes of such program, and shall remain available for such purposes until expended.

((h)) ** Reports** Not later than 18 months after , and annually thereafter, the Secretary shall prepare and submit to the Congress a report describing the programs carried out under this section, including statements regarding—

((1)) the number of enrollees, scholarships, loan repayments, and grant recipients;

((2)) the number of graduates;

((3)) the amount of scholarship payments and loan repayments made;

((4)) which educational institution the recipients attended;

((5)) the number and placement location of the scholarship and loan repayment recipients at health care facilities with a critical shortage of nurses;

((6)) the default rate and actions required;

((7)) the amount of outstanding default funds of both the scholarship and loan repayment programs;

((8)) to the extent that it can be determined, the reason for the default;

((9)) the demographics of the individuals participating in the scholarship and loan repayment programs;

((10)) justification for the allocation of funds between the scholarship and loan repayment programs; and

((11)) an evaluation of the overall costs and benefits of the programs.

((i)) ** Allocations** Of the amounts appropriated under ,, the Secretary may, as determined appropriate by the Secretary, allocate amounts between the program under subsection (a) and the program under subsection (d).section 298d(b) of this title3