
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 23, 2000]
[Document not affected by Public Laws enacted between
  January 23, 2000 and December 4, 2001]
[CITE: 42USC254o]

 
                 TITLE 42--THE PUBLIC HEALTH AND WELFARE
 
                    CHAPTER 6A--PUBLIC HEALTH SERVICE
 
                SUBCHAPTER II--GENERAL POWERS AND DUTIES
 
                       Part D--Primary Health Care
 
       subpart iii--scholarship program and loan repayment program
 
Sec. 254o. Breach of scholarship contract or loan repayment 
        contract
        

(a) Failure to maintain academic standing; dismissal from institution; 
        voluntary termination; liability; failure to accept payment

    (1) An individual who has entered into a written contract with the 
Secretary under section 254l of this title and who--
        (A) fails to maintain an acceptable level of academic standing 
    in the educational institution in which he is enrolled (such level 
    determined by the educational institution under regulations of the 
    Secretary),
        (B) is dismissed from such educational institution for 
    disciplinary reasons,
        (C) voluntarily terminates the training in such an educational 
    institution for which he is provided a scholarship under such 
    contract, before the completion of such training, or
        (D) fails to accept payment, or instructs the educational 
    institution in which he is enrolled not to accept payment, in whole 
    or in part, of a scholarship under such contract,

in lieu of any service obligation arising under such contract, shall be 
liable to the United States for the amount which has been paid to him, 
or on his behalf, under the contract.
    (2) An individual who has entered into a written contract with the 
Secretary under section 254l-1 of this title and who--
        (A) in the case of an individual who is enrolled in the final 
    year of a course of study, fails to maintain an acceptable level of 
    academic standing in the educational institution in which such 
    individual is enrolled (such level determined by the educational 
    institution under regulations of the Secretary) or voluntarily 
    terminates such enrollment or is dismissed from such educational 
    institution before completion of such course of study; or
        (B) in the case of an individual who is enrolled in a graduate 
    training program, fails to complete such training program and does 
    not receive a waiver from the Secretary under section 254l-
    1(b)(1)(B)(ii) of this title,

in lieu of any service obligation arising under such contract shall be 
liable to the United States for the amount that has been paid on behalf 
of the individual under the contract.

(b) Failure to commence or complete service obligations; formula to 
        determine liability; payment to United States; recovery of 
        delinquent damages; disclosure to credit reporting agencies

    (1)(A) Except as provided in paragraph (2), if an individual 
breaches his written contract by failing (for any reason not specified 
in subsection (a) of this section or section 254p(d) \1\ of this title) 
either to begin such individual's service obligation under section 254l 
of this title in accordance with section 254m or 254n of this title or 
to complete such service obligation, the United States shall be entitled 
to recover from the individual an amount determined in accordance with 
the formula
---------------------------------------------------------------------------
    \1\ See References in Text note below.

                                                           t-s

                                          A=3<greek-ph>   <3-ln (>----
                                                    <3-ln )>

                                                            t

in which ``A'' is the amount the United States is entitled to recover, 
``<greek-ph>'' is the sum of the amounts paid under this subpart to or 
on behalf of the individual and the interest on such amounts which would 
be payable if at the time the amounts were paid they were loans bearing 
interest at the maximum legal prevailing rate, as determined by the 
Treasurer of the United States; ``t'' is the total number of months in 
the individual's period of obligated service; and ``s'' is the number of 
months of such period served by him in accordance with section 254m of 
this title or a written agreement under section 254n of this title.
    (B)(i) Any amount of damages that the United States is entitled to 
recover under this subsection or under subsection (c) of this section 
shall, within the 1-year period beginning on the date of the breach of 
the written contract (or such longer period beginning on such date as 
specified by the Secretary), be paid to the United States. Amounts not 
paid within such period shall be subject to collection through 
deductions in Medicare payments pursuant to section 1395ccc of this 
title.
    (ii) If damages described in clause (i) are delinquent for 3 months, 
the Secretary shall, for the purpose of recovering such damages--
        (I) utilize collection agencies contracted with by the 
    Administrator of the General Services Administration; or
        (II) enter into contracts for the recovery of such damages with 
    collection agencies selected by the Secretary.

    (iii) Each contract for recovering damages pursuant to this 
subsection shall provide that the contractor will, not less than once 
each 6 months, submit to the Secretary a status report on the success of 
the contractor in collecting such damages. Section 3718 of title 31 
shall apply to any such contract to the extent not inconsistent with 
this subsection.
    (iv) To the extent not otherwise prohibited by law, the Secretary 
shall disclose to all appropriate credit reporting agencies information 
relating to damages of more than $100 that are entitled to be recovered 
by the United States under this subsection and that are delinquent by 
more than 60 days or such longer period as is determined by the 
Secretary.
    (2) If an individual is released under section 254n \1\ of this 
title from a service obligation under section 234 \1\ of this title (as 
in effect on September 30, 1977) and if the individual does not meet the 
service obligation incurred under section 254n \1\ of this title, 
subsection (f) of such section 234 \1\ of this title shall apply to such 
individual in lieu of paragraph (1) of this subsection.

(c) Failure to commence or complete service obligations for other 
        reasons; determination of liability; payment to United States; 
        waiver of recovery for extreme hardship or good cause shown

    (1) If (for any reason not specified in subsection (a) of this 
section or section 254p(d) \1\ of this title) an individual breaches the 
written contract of the individual under section 254l-1 of this title by 
failing either to begin such individual's service obligation in 
accordance with section 254m or 254n of this title or to complete such 
service obligation, the United States shall be entitled to recover from 
the individual an amount equal to the sum of--
        (A) in the case of a contract for a 2-year period of obligated 
    service--
            (i) the total of the amounts paid by the United States under 
        section 254l-1(g)(2) of this title on behalf of the individual 
        for any period of obligated service; and
            (ii) an amount equal to the unserved obligation penalty;

        (B) in the case of a contract for a period of obligated service 
    of greater than 2 years, and the breach occurs before the end of the 
    first 2 years of such period--
            (i) the total of the amounts paid by the United States under 
        section 254l-1(g)(2) of this title on behalf of the individual 
        for any period of obligated service; and
            (ii) an amount equal to the unserved obligation penalty; and

        (C) in the case of a contract for a period of obligated service 
    of greater than 2 years, and the breach occurs after the first 2 
    years of such period--
            (i) the total of the amounts paid by the United States under 
        section 254l-1(g)(2) of this title on behalf of the individual 
        for any period of obligated service not served; and
            (ii) if the individual breaching the contract failed to give 
        the Secretary notice, that the individual intends to take action 
        which constitutes a breach of the contract, at least 1 year (or 
        such shorter period of time as the Secretary determines is 
        adequate for finding a replacement) prior to the breach, 
        $10,000.

    (2) For purposes of paragraph (1), the term ``unserved obligation 
penalty'' means the amount equal to the product of the number of months 
of obligated service that were not completed by an individual, 
multiplied by $1,000, except that in any case in which the individual 
fails to serve 1 year, the unserved obligation penalty shall be equal to 
the full period of obligated service multiplied by $1,000.
    (3) The Secretary may waive, in whole or in part, the rights of the 
United States to recover amounts under this section in any case of 
extreme hardship or other good cause shown, as determined by the 
Secretary.
    (4) Damages that the United States is entitled to recover shall be 
paid in accordance with subsection (b)(1)(B) of this section.

(d) Cancellation of obligation upon death of individual; waiver or 
        suspension of obligation for impossibility, hardship, or 
        unconscionability; release of debt by discharge in bankruptcy, 
        time limitations

    (1) Any obligation of an individual under the Scholarship Program 
(or a contract thereunder) or the Loan Repayment Program (or a contract 
thereunder) for service or payment of damages shall be canceled upon the 
death of the individual.
    (2) The Secretary shall by regulation provide for the partial or 
total waiver or suspension of any obligation of service or payment by an 
individual under the Scholarship Program (or a contract thereunder) or 
the Loan Repayment Program (or a contract thereunder) whenever 
compliance by the individual is impossible or would involve extreme 
hardship to the individual and if enforcement of such obligation with 
respect to any individual would be unconscionable.
    (3)(A) Any obligation of an individual under the Scholarship Program 
(or a contract thereunder) or the Loan Repayment Program (or a contract 
thereunder) for payment of damages may be released by a discharge in 
bankruptcy under title 11 only if such discharge is granted after the 
expiration of the five-year period beginning on the first date that 
payment of such damages is required, and only if the bankruptcy court 
finds that nondischarge of the obligation would be unconscionable.
    (B)(i) Subparagraph (A) shall apply to any financial obligation of 
an individual under the provision of law specified in clause (ii) to the 
same extent and in the same manner as such subparagraph applies to any 
obligation of an individual under the Scholarship or Loan Repayment 
Program (or contract thereunder) for payment of damages.
    (ii) The provision of law referred to in clause (i) is subsection 
(f) of section 234 \2\ of this title, as in effect prior to the repeal 
of such section by section 408(b)(1) of Public Law 94-484.
---------------------------------------------------------------------------
    \2\ See References in Text note below.
---------------------------------------------------------------------------

(July 1, 1944, ch. 373, title III, Sec. 338E, formerly title VII, 
Sec. 754, as added Pub. L. 94-484, title IV, Sec. 408(b)(1), Oct. 12, 
1976, 90 Stat. 2286; amended Pub. L. 95-83, title III, Sec. 307(g), Aug. 
1, 1977, 91 Stat. 391; renumbered Sec. 338D and amended Pub. L. 97-35, 
title XXVII, Sec. 2709(a), (e)(1)-(4)(A), Aug. 13, 1981, 95 Stat. 908, 
911; Pub. L. 97-414, Sec. 8(g)(2), Jan. 4, 1983, 96 Stat. 2061; 
renumbered Sec. 338E and amended Pub. L. 100-177, title II, 
Secs. 201(2), 202(e), title III, Sec. 308(a), Dec. 1, 1987, 101 Stat. 
992, 997, 1006; Pub. L. 100-203, title IV, Sec. 4052(b), Dec. 22, 1987, 
101 Stat. 1330-97; Pub. L. 100-360, title IV, Sec. 411(f)(10)(B), July 
1, 1988, 102 Stat. 780; Pub. L. 101-597, title II, Sec. 203(a), Nov. 16, 
1990, 104 Stat. 3027.)

                       References in Text

    Section 254p of this title, referred to in subsecs. (b)(1)(A) and 
(c)(1), was in the original a reference to section 338F of act July 1, 
1944, which was renumbered section 338G by Pub. L. 101-597, title II, 
Sec. 204, Nov. 16, 1990, 104 Stat. 3027.
    Section 234 of this title, referred to in subsecs. (b)(2) and 
(d)(3)(B)(ii), was repealed by Pub. L. 94-484, title IV, Sec. 408(b)(1), 
Oct. 12, 1976, 90 Stat. 2281, effective Oct. 1, 1977.
    Section 254n of this title, referred to in subsec. (b)(2), in the 
original referred to section 753, meaning section 753 of the Public 
Health Service Act, which was classified to section 294v of this title. 
Section 753 was redesignated section 338C of the Public Health Service 
Act by Pub. L. 97-35, title XXVII, Sec. 2709(a), Aug. 13, 1981, 95 Stat. 
908, and was transferred to section 254n of this title. Section 338C of 
the Public Health Service Act was renumbered section 338D by Pub. L. 
100-177, title II, Sec. 201(2), Dec. 1, 1987, 101 Stat. 992.

                          Codification

    Section was formerly classified to section 294w of this title prior 
to its renumbering by Pub. L. 97-35.


                            Prior Provisions

    A prior section 338E of act July 1, 1944, was renumbered section 
338F by Pub. L. 100-177 and classified to section 254p of this title, 
and subsequently renumbered 338G by Pub. L. 101-597.


                               Amendments

    1990--Subsec. (d)(3). Pub. L. 101-597 designated existing provision 
as subpar. (A) and added subpar. (B).
    1988--Subsec. (b)(1)(B)(i). Pub. L. 100-360 made technical amendment 
to directory language of Pub. L. 100-203, see 1987 Amendment note below.
    1987--Pub. L. 100-177, Sec. 202(e)(6), inserted ``or loan repayment 
contract'' in section catchline.
    Subsec. (a). Pub. L. 100-177, Sec. 202(e)(1), designated existing 
provisions as par. (1), and former pars. (1) to (4) as subpars. (A) to 
(D), respectively, and added par. (2).
    Subsec. (b)(1). Pub. L. 100-177, Sec. 202(e)(2), designated existing 
provisions as subpar. (A), made technical amendments to references to 
sections 254m, 254n, and 254p of this title wherever appearing to 
reflect renumbering of corresponding sections of original act, inserted 
``under section 254l of this title'' after first reference to ``service 
obligation'' as the probable intent of Congress, struck out at end ``Any 
amount of damages which the United States is entitled to recover under 
this subsection shall, within the one year period beginning on the date 
of the breach of the written contract (or such longer period beginning 
on such date as specified by the Secretary for good cause shown), be 
paid to the United States.'', and added subpar. (B).
    Subsec. (b)(1)(B)(i). Pub. L. 100-203, as amended by Pub. L. 100-
360, inserted at end ``Amounts not paid within such period shall be 
subject to collection through deductions in Medicare payments pursuant 
to section 1395ccc of this title.''
    Subsec. (c). Pub. L. 100-177, Sec. 202(e)(4), added subsec. (c). 
Former subsec. (c) redesignated (d).
    Subsec. (d). Pub. L. 100-177, Secs. 202(e)(3), (5), 308(a), 
redesignated subsec. (c) as (d), in pars. (1), (2), and (3), inserted 
``or the Loan Repayment Program (or a contract thereunder'', and in par. 
(3) inserted ``, and only if the bankruptcy court finds that 
nondischarge of the obligation would be unconscionable''.
    1983--Subsec. (b)(1). Pub. L. 97-414 substituted ``section 254p(d)'' 
for ``section 254q(b)''.
    1981--Subsec. (a). Pub. L. 97-35, Sec. 2709(e)(1), (2), redesignated 
subsec. (b) as (a) and, as so redesignated, in introductory text 
substituted ``254l'' for ``294t'' and added par. (4). Former subsec. 
(a), which related to liability of individual upon failure to accept 
payment, was struck out.
    Subsec. (b). Pub. L. 97-35, Sec. 2709(e)(1), (3), redesignated 
subsec. (c) as (b) and, as so redesignated, designated existing 
provisions as par. (1) and made numerous changes to reflect renumbering 
of subpart sections, and added par. (2). Former subsec. (b) redesignated 
(a).
    Subsecs. (c), (d). Pub. L. 97-35, Sec. 2709(e)(1), (4)(A), 
redesignated subsec. (d) as (c) and, as so redesignated, in par. (2) 
inserted reference to partial or total waiver. Former subsec. (c) 
redesignated (b).
    1977--Subsec. (c). Pub. L. 95-83 substituted `` `<greek-ph>' is the 
sum of the amounts paid under this subpart to or on behalf of the 
individual and the interest on such amounts which would be payable if at 
the time the amounts were paid they were loans'' for `` `<greek-ph>' is 
the sum of the amount paid under this subpart to or on behalf of the 
individual and the interest on such amount which would be payable if at 
the time it was paid it was a loan''.


                    Effective Date of 1990 Amendment

    Section 203(b) of Pub. L. 101-597 provided that: ``With respect to 
any financial obligation of an individual under subsection (f) of 
section 225 of the Public Health Service Act [former section 234 of this 
title], as in effect prior to the repeal of such section by section 
408(b)(1) of Public Law 94-484, the amendment made by subsection (a) of 
this section [amending this section] applies to any backruptcy [sic] 
proceeding in which discharge of such an obligation has not been granted 
before the date that is 31 days after the date of the enactment of this 
Act [Nov. 16, 1990].''


                    Effective Date of 1988 Amendment

    Except as specifically provided in section 411 of Pub. L. 100-360, 
amendment by Pub. L. 100-360, as it relates to a provision in the 
Omnibus Budget Reconciliation Act of 1987, Pub. L. 100-203, effective as 
if included in the enactment of that provision in Pub. L. 100-203, see 
section 411(a) of Pub. L. 100-360, set out as a Reference to OBRA; 
Effective Date note under section 106 of Title 1, General Provisions.


                             Effective Date

    Section effective Oct. 1, 1977, see section 408(b)(1) of Pub. L. 94-
484, set out in part as a note under section 254l of this title.


 Effective Date; Savings Provision; Credit for Period of Internship or 
     Residency Before September 30, 1977, Towards Service Obligation

    See section 408(b)(2) of Pub. L. 94-484, set out as a note under 
section 254l of this title.


                      Special Repayment Provisions

    Section 204 of Pub. L. 100-177 provided that an individual who 
breached a written contract entered into under section 254l of this 
title by failing either to begin such individual's service obligation in 
accordance with section 254m of this title or to complete such service 
obligation; or otherwise breached such a contract; and, as of Nov. 1, 
1987, was liable to United States under subsec. (b) of this section was 
to be relieved of liability to United States under such section if the 
individual provided notice to Secretary and service in accordance with a 
written contract with the Secretary that obligated the individual to 
provide service in accordance with section and authorized Secretary to 
exclude an individual from relief from liability under this section for 
reasons related to the individual's professional competence or conduct.


                          Existing Proceedings

    Section 308(b) of Pub. L. 100-177 provided that: ``The amendment 
made by subsection (a) [amending this section] applies to any bankruptcy 
proceeding in which discharge of an obligation under section 338E(d)(3) 
of the Public Health Service Act [subsec. (d)(3) of this section] (as 
redesignated by sections 201(2) and 202(e)(3) of this Act) has not been 
granted before the date that is 31 days after the date of enactment of 
this Act [Dec. 1, 1987].''

                  Section Referred to in Other Sections

    This section is referred to in sections 254l, 254l-1, 254o-1, 254p, 
288-2, 288-4, 288-5, 1395ccc of this title.
