NSL Law

TITLE 42 - THE PUBLIC HEALTH AND WELFARE
CHAPTER 6A - PUBLIC HEALTH SERVICE
SUBCHAPTER VI - NURSING WORKFORCE DEVELOPMENT
Part E - Student Loans
Sec. 297a. Student loan fund
-STATUTE(a) Agreements to establish and operate fund authorized
The Secretary is authorized to enter into an agreement for the
establishment and operation of a student loan fund in accordance
with this part (!1) with any public or nonprofit private school of
nursing which is located in a State.
(b) Provisions of agreements
Each agreement entered into under this section shall (1) provide for establishment of a student loan fund by the
school;
(2) provide for deposit in the fund, except as provided in
section 297h of this title, of (A) the Federal capital
contributions paid from allotments under section 297d of this
title to the school by the Secretary, (B) an additional amount
from other sources equal to not less than one-ninth of such
Federal capital contributions, (C) collections of principal and
interest on loans made from the fund, (D) collections pursuant to
section 297b(f) of this title, and (E) any other earnings of the
fund;
(3) provide that the fund, except as provided in section 297h
of this title, shall be used only for loans to students of the
school in accordance with the agreement and for costs of
collection of such loans and interest thereon;
(4) provide that loans may be made from such fund only to
students pursuing a fulltime or half-time course of study at the
school leading to a baccalaureate or associate degree in nursing
or an equivalent degree or a diploma in nursing, or to a graduate
degree in nursing;
(5) contain such other provisions as are necessary to protect
the financial interests of the United States.
(c) Regulatory standards applicable to collection of loans
(1) Any standard established by the Secretary by regulation for
the collection by schools of nursing of loans made pursuant to loan
agreements under this part (!1) shall provide that the failure of
any such school to collect such loans shall be measured in
accordance with this subsection. With respect to the student loan
fund established pursuant to such agreements, this subsection may
not be construed to require such schools to reimburse such loan

fund for loans that became uncollectable prior to 1983.
(2) The measurement of a school's failure to collect loans made
under this part (!1) shall be the ratio (stated as a percentage)
that the defaulted principal amount outstanding of such school
bears to the matured loans of such school.
(3) For purposes of this subsection (A) the term "default" means the failure of a borrower of a
loan made under this part (!1) to (i) make an installment payment when due; or
(ii) comply with any other term of the promissory note for
such loan,
except that a loan made under this part (!1) shall not be
considered to be in default if the loan is discharged in
bankruptcy or if the school reasonably concludes from written
contacts with the borrower that the borrower intends to repay the
loan;
(B) the term "defaulted principal amount outstanding" means the
total amount borrowed from the loan fund of a school that has
reached the repayment stage (minus any principal amount repaid or
cancelled) on loans (i) repayable monthly and in default for at least 120 days;
and
(ii) repayable less frequently than monthly and in default
for at least 180 days;
(C) the term "grace period" means the period of nine months
beginning on the date on which the borrower ceases to pursue a
full-time or half-time course of study at a school of nursing;
and
(D) the term "matured loans" means the total principal amount
of all loans made by a school of nursing under this part (!1)
minus the total principal amount of loans made by such school to
students who are (i) enrolled in a full-time or half-time course of study at
such school; or
(ii) in their grace period.
Sec. 297b. Loan provisions
(a) Maximum amount per individual per year; preference to first
year students
The total of the loans for any academic year (or its equivalent,
as determined under regulations of the Secretary) made by schools
of nursing from loan funds established pursuant to agreements under

this part (!1) may not exceed $2,500 in the case of any student,
except that for the final two academic years of the program
involved, such total may not exceed $4,000. The aggregate of the
loans for all years from such funds may not exceed $13,000 in the
case of any student. In the granting of such loans, a school shall
give preference to licensed practical nurses, to persons with
exceptional financial need, and to persons who enter as first-year
students after enactment of this subchapter.
(b) Terms and conditions
Loans from any such student loan fund by any school shall be made
on such terms and conditions as the school may determine; subject,
however, to such conditions, limitations, and requirements as the
Secretary may prescribe (by regulation or in the agreement with the
school) with a view to preventing impairment of the capital of such
fund to the maximum extent practicable in the light of the
objective of enabling the student to complete his course of study;
and except that (1) such a loan may be made only to a student who (A) is in
need of the amount of the loan to pursue a full-time or half-time
course of study at the school leading to a baccalaureate or
associate degree in nursing or an equivalent degree, or a diploma
in nursing, or a graduate degree in nursing, (B) is capable, in
the opinion of the school, of maintaining good standing in such
course of study, and (C) with respect to any student enrolling in
the school after June 30, 1986, is of financial need (as defined
in regulations issued by the Secretary);; (!2)
(2) such a loan shall be repayable in equal or graduated
periodic installments (with the right of the borrower to
accelerate repayment) over the ten-year period which begins nine
months after the student ceases to pursue a full-time or
half-time course of study at a school of nursing, excluding from
such 10-year period all (A) periods (up to three years) of (i)
active duty performed by the borrower as a member of a uniformed
service, or (ii) service as a volunteer under the Peace Corps Act
[22 U.S.C. 2501 et seq.], (B) periods (up to ten years) during
which the borrower is pursuing a full-time or half-time course of
study at a collegiate school of nursing leading to baccalaureate
degree in nursing or an equivalent degree, or to graduate degree
in nursing, or is otherwise pursuing advanced professional
training in nursing (or training to be a nurse anesthetist), and
(C) such additional periods under the terms of paragraph (8) of
this subsection;
(3) in the case of a student who received such a loan before
September 29, 1979, an amount up to 85 per centum of any such

loan made before such date (plus interest thereon) shall be
canceled for full-time employment as a professional nurse
(including teaching in any of the fields of nurse training and
service as an administrator, supervisor, or consultant in any of
the fields of nursing) in any public or nonprofit private agency,
institution, or organization (including neighborhood health
centers), at the rate of 15 per centum of the amount of such loan
(plus interest) unpaid on the first day of such service for each
of the first, second, and third complete year of such service,
and 20 per centum of such amount (plus interest) for each
complete fourth and fifth year of such service;
(4) the liability to repay the unpaid balance of such loan and
accrued interest thereon shall be canceled upon the death of the
borrower, or if the Secretary determines that he has become
permanently and totally disabled;
(5) such a loan shall bear interest on the unpaid balance of
the loan, computed only for periods during which the loan is
repayable, at the rate of 5 percent per annum;
(6) such a loan shall be made without security or endorsement,
except that if the borrower is a minor and the note or other
evidence of obligation executed by him would not, under the
applicable law, create a binding obligation, either security or
endorsement may be required;
(7) no note or other evidence of any such loan may be
transferred or assigned by the school making the loan except
that, if the borrower transfers to another school participating
in the program under this part (!1) such note or other evidence
of a loan may be transferred to such other school; and
(8) pursuant to uniform criteria established by the Secretary,
the repayment period established under paragraph (2) for any
student borrower who during the repayment period failed to make
consecutive payments and who, during the last 12 months of the
repayment period, has made at least 12 consecutive payments may
be extended for a period not to exceed 10 years.
(c) Cancellation
Where all or any part of a loan, or interest, is canceled under
this section, the Secretary shall pay to the school an amount equal
to the school's proportionate share of the canceled portion, as
determined by the Secretary.
(d) Installments
Any loan for any year by a school from a student loan fund
established pursuant to an agreement under this part (!1) shall be
made in such installments as may be provided in regulations of the
Secretary or such agreement and, upon notice to the Secretary by
the school that any recipient of a loan is failing to maintain
satisfactory standing, any or all further installments of his loan

shall be withheld, as may be appropriate.
(e) Availability to eligible students in need
An agreement under this part (!1) with any school shall include
provisions designed to make loans from the student loan fund
established thereunder reasonably available (to the extent of the
available funds in such fund) to all eligible students in the
school in need thereof.
(f) Penalty for late payment
Subject to regulations of the Secretary and in accordance with
this section, a school shall assess a charge with respect to a loan
from the loan fund established pursuant to an agreement under this
part for failure of the borrower to pay all or any part of an
installment when it is due and, in the case of a borrower who is
entitled to deferment of the loan under subsection (b)(2) of this
section or cancellation of part or all of the loan under subsection
(b)(3) of this section, for any failure to file timely and
satisfactory evidence for such entitlement. No such charge may be
made if the payment of such installment or the filing of such
evidence is made within 60 days after the date on which such
installment or filing is due. The amount of any such charge may not
exceed an amount equal to 6 percent of the amount of such
installment. The school may elect to add the amount of any such
charge to the principal amount of the loan as of the first day
after the day on which such installment or evidence was due, or to
make the amount of the charge payable to the school not later than
the due date of the next installment after receipt by the borrower
of notice of the assessment of the charge.
(g) Minimum monthly repayment
A school may provide in accordance with regulations of the
Secretary, that during the repayment period of a loan from a loan
fund established pursuant to an agreement under this part
payments of principal and interest by the borrower with respect to
all the outstanding loans made to him from loan funds so
established shall be at a rate equal to not less than $40 per
month.
(h) Loan cancellation
Notwithstanding the amendment made by section 6(b) of the Nurse
Training Act of 1971 to this section (A) any person who obtained one or more loans from a loan fund
established under this part, who before November 18, 1971,
became eligible for cancellation of all or part of such loans
(including accrued interest) under this section (as in effect on
the day before such date), and who on such date was not engaged
in a service for which loan cancellation was authorized under
this section (as so in effect), may at any time elect to receive
such cancellation in accordance with this subsection (as so in

effect); and
(B) in the case of any person who obtained one or more loans
from a loan fund established under this part and who on such
date was engaged in a service for which cancellation of all or
part of such loans (including accrued interest) was authorized
under this section (as so in effect), this section (as so in
effect) shall continue to apply to such person for purposes of
providing such loan cancellation until he terminates such
service.
Nothing in this subsection shall be construed to prevent any person
from entering into an agreement for loan cancellation under
subsection (h) (!1) of this section (as amended by section 6(b)(2)
of the Nurse Training Act of 1971).
(i) Loan repayment
Upon application by a person who received, and is under an
obligation to repay, any loan made to such person as a nursing
student, the Secretary may undertake to repay (without liability to
the applicant) all or any part of such loan, and any interest or
portion thereof outstanding thereon, upon his determination,
pursuant to regulations establishing criteria therefor, that the
applicant (1) failed to complete the nursing studies with respect to
which such loan was made;
(2) is in exceptionally needy circumstances; and
(3) has not resumed, or cannot reasonably be expected to
resume, such nursing studies within two years following the date
upon which the applicant terminated the studies with respect to
which such loan was made.
(j) Collection by Secretary of loan in default; preconditions and
procedures applicable
The Secretary is authorized to attempt to collect any loan which
was made under this part,(!1) which is in default, and which was
referred to the Secretary by a school of nursing with which the
Secretary has an agreement under this part,(!1) on behalf of that
school under such terms and conditions as the Secretary may
prescribe (including reimbursement from the school's student loan
fund for expenses the Secretary may reasonably incur in attempting
collection), but only if the school has complied with such
requirements as the Secretary may specify by regulation with
respect to the collection of loans under this part.(!1) A loan so
referred shall be treated as a debt subject to section 5514 of
title 5. Amounts collected shall be deposited in the school's
student loan fund. Whenever the Secretary desires the institution
of a civil action regarding any such loan, the Secretary shall
refer the matter to the Attorney General for appropriate action.

(k) Redesignated (j)
(l) Elimination of statute of limitation for loan collections
(1) Purpose
It is the purpose of this subsection to ensure that obligations
to repay loans under this section are enforced without regard to
any Federal or State statutory, regulatory, or administrative
limitation on the period within which debts may be enforced.
(2) Prohibition
Notwithstanding any other provision of Federal or State law, no
limitation shall terminate the period within which suit may be
filed, a judgment may be enforced, or an offset, garnishment, or
other action may be initiated or taken by a school of nursing
that has an agreement with the Secretary pursuant to section 297a
of this title that is seeking the repayment of the amount due
from a borrower on a loan made under this part (!1) after the
default of the borrower on such loan.
Sec. 297d. Allotments and payments of Federal capital contributions
-STATUTE(a) Application for allotment; reduction or adjustment of amount
requested in application; reallotment; continued availability of
funds
(1) The Secretary shall from time to time set dates by which
schools of nursing must file applications for Federal capital
contributions.
(2)(A) If the total of the amounts requested for any fiscal year
in such applications exceeds the total amount appropriated under
section 297c (!1) of this title for that fiscal year, the allotment
from such total amount to the loan fund of each school of nursing
shall be reduced to whichever of the following is the smaller:
(i) The amount requested in its application.
(ii) An amount which bears the same ratio to the total amount
appropriated as the number of students estimated by the Secretary
to be enrolled on a full-time basis in such school during such
fiscal year bears to the estimated total number of students
enrolled in all such schools on a full-time basis during such
year.
(B) Amounts remaining after allotment under subparagraph (A)
shall be reallotted in accordance with clause (ii) of such
subparagraph among schools whose applications requested more than
the amounts so allotted to their loan funds, but with such
adjustments as may be necessary to prevent the total allotted to
any such school's loan fund under this paragraph and paragraph (3)

from exceeding the total so requested by it.
(3) Funds which, pursuant to section 297e(c) of this title or
pursuant to a loan agreement under section 297a of this title are
returned to the Secretary in any fiscal year, shall be available
for allotment until expended. Funds described in the preceding
sentence shall be allotted among schools of nursing in such manner
as the Secretary determines will best carry out this part.(!1)
(b) Installment payment of allotments
Allotments to a loan fund of a school shall be paid to it from
time to time in such installments as the Secretary determines will
not result in unnecessary accumulations in the loan fund at such
school.
(c) Manner of payment
The Federal capital contributions to a loan fund of a school
under this part (!1) shall be paid to it from time to time in such
installments as the Secretary determines will not result in
unnecessary accumulations in the loan fund at such school.
Sec. 297e. Distribution of assets from loan funds
-STATUTE(a) Capital distribution of balance of loan fund
If a school terminates a loan fund established under an agreement
pursuant to section 297a(b) of this title, or if the Secretary for
good cause terminates the agreement with the school, there shall be
a capital distribution as follows:
(1) The Secretary shall first be paid an amount which bears the
same ratio to such balance in such fund on the date of termination
of the fund as the total amount of the Federal capital
contributions to such fund by the Secretary pursuant to section
297a(b)(2)(A) of this title bears to the total amount in such fund
derived from such Federal capital contributions and from funds
deposited therein pursuant to section 297a(b)(2)(B) of this title.
(2) The remainder of such balance shall be paid to the school.
(b) Payment of principal or interest on loans
If a capital distribution is made under subsection (a) of this
section, the school involved shall, after such capital
distribution, pay to the Secretary, not less often than quarterly,
the same proportionate share of amounts received by the school in
payment of principal or interest on loans made from the loan fund
established under section 297a(b) of this title as determined by
the Secretary under subsection (a) of this section.
(c) Payment of balance of loan fund
(1) Within 90 days after the termination of any agreement with a
school under section 297a of this title or the termination in any
other manner of a school's participation in the loan program under

this part,(!1) such school shall pay to the Secretary from the
balance of the loan fund of such school established under section
297a of this title, an amount which bears the same ratio to the
balance in such fund on the date of such termination as the total
amount of the Federal capital contributions to such fund by the
Secretary pursuant to section 297a(b)(2)(A) of this title bears to
the total amount in such fund on such date derived from such
Federal capital contributions and from funds deposited in the fund
pursuant to section 297a(b)(2)(B) of this title. The remainder of
such balance shall be paid to the school.
(2) A school to which paragraph (1) applies shall pay to the
Secretary after the date on which payment is made under such
paragraph and not less than quarterly, the same proportionate share
of amounts received by the school after the date of termination
referred to in paragraph (1) in payment of principal or interest on
loans made from the loan fund as was determined for the Secretary
under such paragraph.
Sec. 297g. Modification of agreements; compromise, waiver or
release
-STATUTEThe Secretary may agree to modifications of agreements made under
this part,(!1) and may compromise, waive, or release any right,
title, claim, or demand of the United States arising or acquired
under this part.
Sec. 297i. Procedures for appeal of terminations
-STATUTEIn any case in which the Secretary intends to terminate an
agreement with a school of nursing under this part,(!1) the
Secretary shall provide the school with a written notice specifying
such intention and stating that the school may request a formal
hearing with respect to such termination. If the school requests
such a hearing within 30 days after the receipt of such notice, the
Secretary shall provide such school with a hearing conducted by an
administrative law judge.
Sec. 297n. Loan repayment and scholarship programs
(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,(!1) 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;
the Secretary shall make payments in accordance with subsection (b)
of this section, for and on behalf of that individual, on the
principal of and interest on any loan of that individual described
in paragraph (2) of this subsection which is outstanding on the
date the individual begins the service specified in the agreement
described in paragraph (3) of this subsection. After fiscal year
2007, the Secretary may not, pursuant to any agreement entered into
under this subsection, assign a nurse to any private entity unless
that entity is nonprofit.
(b) Manner of payments
The payments described in subsection (a) of this section 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) of
this section, the Secretary shall pay 30 percent of the principal
of, and the interest on each loan of such individual described in
subsection (a)(2) of this section which is outstanding on the
date he 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) of this section, 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) of this section, 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 of
this chapter 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) of this
section, 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) of this
section 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.
(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 August 1, 2002, 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) Funding
(1) Authorization of appropriations
For the purpose of payments under agreements entered into under
subsection (a) or (d) of this section, there are authorized to be
appropriated such sums as may be necessary for each of fiscal
years 2003 through 2007.
(2) Allocations
Of the amounts appropriated under paragraph (1), the Secretary

may, as determined appropriate by the Secretary, allocate amounts
between the program under subsection (a) of this section and the
program under subsection (d) of this section.