In the example above, repayment under the agreement begins with the 14th installment. The last full payment by the Secretary on behalf of the borrower under a two-year agreement is the 27th monthly payment, because only 60° of the outstanding principal ($662.74) can be paid. The borrower must forward a supplemental payment to the lender with the 28th installment and make the 29th payment in full. In this example, even if the borrower eventually elects to serve an optional third year in the shortage area, the Secretary will be unable to resume repayment up to 85 of the outstanding principal because the loan will have been repaid before the initial two year period is completed. Thus, the total payments of principal and interest which the borrower is required to make are greater than would be the case under a three-year agreement.

19

INSTALLMENT LOANS FROM LENDERS USING COMPUTERIZED ACCOUNTING
SYSTEMS

Many commercial lenders use a consumer credit accounting system. " which a borrower may be issued a coupon book with coupers showins

of each monthly payment and the date it is due. Under the method of accruing interest usually employed under such systems, a borrower may choose to send in one payment with one coupon, or he may choose to send in six payments at one time with six coupons. In the latter case, such a lump sum payment does not result in a direct reduction of principal reflected in the next installment payment due within the system. Although no lump sum payment will be made until the borrower has completed his period of service in the shortage area pursuant to the agreement, the effect of the final payment may be to "prepay" a number of future installments. In this event the borrower is expected to continue to make regular installment payments in a timely manner on the remaining balance of the loan.

The examples in this Handbook are intended only to illustrate how total repayment on behalf of the borrower is dependent upon the type of loan, the outstanding principal balance to which the terms of the agreement apply, the method of interest accrual, and the point in the repayment schedule when the borrower enters the agreement. The payments which the Secretary will actually make on behalf of the borrower will be itemized on attachmer.ts to the agreement when it is forwarded to the borrower for signature. If the borrower has any questions about the repayment arrangements, these should

21

LIST OF RELATED FORMS FORMS

AND PUBLICATIONS

REGIONAL OFFICES

Request to Enter an Agreement for Service in a Shortage Area (Form
NIH-2055-1)

Disclosure and Confirmation of Educational Loan (Form NIH-2055-2)

Agreement with the Secretary for Service in a Shortage Area (form
NIH-2055-3)

Certification of Practice in a Shortage Area (Form NIH-2055-4)

PUBLICATIONS

List of Designated Shortage Areas (available from the Division of Physician
and Health Professions Education address on page 3 of this Handbook)

PHYSICIAN SHORTAGE AREAS

FOR PURPOSES OF

CANCELLATION OF HEALTH PROFESSIONS STUDENT LOANS

AND

REPAYMENT OF EDUCATIONAL LOANS PURSUANT

TO AN AGREEMENT

DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE
PUBLIC HEALTH SERVICE

HEALTH RESOURCES ADMINISTRATION BUREAU OF HEALTH RESOURCES DEVELOPMENT 9000 ROCKVILLE PIKE

DISCRIMINATION PROHIBITED

Title VI of the Civil Rights Act of 1964 states: "No person in the United States shall, on the ground of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance."

July 1973