(3) That if the applicant shall default in making periodic payment, when due, of the principal and interest on the loan guaranteed under the agreement, the holder of the loan shall promptly give the Secretary written notification of such default. The Secretary shall, immediately upon receipt of such notice, provide the holder with written acknowledgement of such receipt.

(4) That if such default in making periodic payment when due of the principal and interest on the guaranteed loan is not cured within 90 days after receipt by the Secretary of notice of such default, the holder of the loan shall have the right to make demand upon the Secretary, in such form and manner as the Secretary may prescribe, for payment of 90 percent of the amount of the overdue payments of principal and accrued interest, together with such reasonable late charges as are made in accordance with the terms of the credit instrument or security instrument evidencing or securing such loan. The Secretary shall pay such amount from funds available to him for these purposes.

(5) That in the event of exercise by the holder of the loan of any right to accelerate payment of such loan as a result of the applicants default in making periodic payment when due of the principal and interest on the guaranteed loan, the Secretary shall, upon demand by the holder not less than 90 days after receipt by the Secretary of notification of such default, pay to such holder 90 percent of the total amount of principal and of interest on the loan remaining unpaid after the holder has exercised his right to foreclose upon and dispose of the security and has applied the proceeds thereby received to reduce the outstanding balance of the loan, in accordance with applicable law and the terms of the security instrument.

(6) That the Secretary shall not guarantee any funds which are disbursed by a lender following notification by the Secretary to such lender that the Assurance executed by the Applicant under section 799A of the Act is no longer satisfactory.

(b) Interest subsidy. Each agreement pertaining to the payment of interest

subsidies with respect to a loan shall include the following provisions:

(1) That the holder of the loan shall have a contractual right to receive from the United States interest subsidy payments in amounts sufficient to reduce by up to 3 percent per annum the net effective interest rate determined by the Secretary to be otherwise payable on such loan.

(2) That payments of interest subsidies pursuant to paragraph (b)(1) of this section will be made by the Secretary, in accordance with the terms of the loan with respect to which the interest subsidies are paid, directly to the holder of such loan, or to a trustee or agent designated in writing to the Secretary by such holder, until such time as the Secretary is notified in writing by the holder that such loan has been transferred. Pursuant to such written notification of transfer, the Secretary will make such interest payments directly to the new holder (transferee) of the loan: Provided, however, That it shall be the responsibility of the holder to remit any payments of interest subsidy to the new holder which the Secretary may have made to the holder after such transfer and prior to receipt of such written notice, and the Secretary shall not be liable to any party for amounts remitted to the holder prior to receipt of such written notice and acknowledgment in writing by the Secretary of receipt of such notice.

(3) That the holder of the loan will promptly notify the Secretary of any default or prepayment by the applicant with respect to the loan.

(4) In the event of any exercise by the holder of the loan of the right to accelerate payment of such loan, whether as a result of default on the part of the applicant or otherwise, the Secretary's obligations with respect to the payment of interest subsidies shall cease.

(5) Where, during the life of the loan with respect to which interest subsidies are to be paid, the applicant ceases to use the facility for the purposes for which constructed, the Secretary's obligation with respect to the payment of interest subsidies shall cease: Provided, however, That where the applicant is continuing to use the

facility for purposes eligible for support under part B of title VII of the act, the Secretary may make a determination, based upon the health manpower needs of the community served by the facility as well as other relevant factors, to continue to make interest subsidy payments in accord with the agreement.

(6) Where during the life of the loan with respect to which interest subsidies are to be paid, it is determined, after an opportunity for a hearing pursuant to 45 CFR part 83, that the Assurance executed by the applicant under section 704 (or its predecessor, section 799A) of the Act, is no longer satisfactory, the Secretary's obligation with respect to the payment of interest subsidies shall cease: Provided, however, That the Secretary shall resume making interest subsidy payments if he determines that a subsequent Assurance submitted by the applicant is satisfactory.

(7) Where during the life of the loan with respect to which interest subsidies are to be paid, it is determined by the Secretary, after an opportunity for a hearing pursuant to 45 CFR parts 80 and 81, that the applicant has ceased to comply with the Assurance it has executed under 45 CFR 80.4(d) concerning nondiscrimination on the basis of race, color or national origin, the Secretary's obligation with respect to the payment of interest subsidies shall cease: Provided, however, That the Secretary shall resume making interest subsidy payments if he subsequently determines that the applicant has come into compliance with the requirements of title VI of the Civil Rights Act of 1964 and implementing regulations.

(8) Where during the life of the loan with respect to which interest subsidies are to be paid, it is determined by the Secretary after an opportunity for a hearing pursuant to title IX of the Education Amendments of 1972, that the applicant has ceased to comply with such title, and its implementing regulations, the Secretary's obligation with respect to the payment of interest subsidies shall cease: Provided, however, That the Secretary shall resume making interest subsidy payments if he subsequently deter

mines that the applicant has come into compliance with the requirements of title IX of the Education Amendments of 1972 and implementing regulations.

(c) General. In addition to the applicable requirements of paragraphs (a) and (b) of this section, each agreement, whether pertaining to a loan guarantee or interest subsidy or both, shall contain such other provisions as the Secretary finds necessary in order to protect the financial interests of the United States.

[38 FR 31836, Nov. 19, 1973, as amended at 49 FR 38113, Sept. 27, 1984]

$57.1515 Loan closing.

Closing of any loan with respect to which a guarantee is made or interest subsidies are paid under this subpart shall be accomplished at such time as may be agreed upon by the parties to such loan and found acceptable to the Secretary.

$57.1516 Right of recovery-subordination.

(a) The United States shall be entitled to recover from the applicant for a loan guarantee under this subpart the amount of any payment made pursuant to such guarantee, unless the Secretary waives such right of recovery as provided in § 57.1517.

(b) Upon making of any payments pursuant to a loan guarantee under this subpart, the United States shall be subrogated to all of the rights of the recipient of the payments with respect to which the guarantee was made.

§ 57.1517 Waiver of right of recovery.

In determining whether there is good cause for waiver of any right of recovery which he may have against any applicant by reason of any payments made pursuant to a loan guarantee under this subpart, the Secretary shall take into consideration the extent to which:

(a) The facility with respect to which the loan guarantee was made will continue to be devoted by the applicant or other owner to the teaching of health professions personnel, or to other purposes in the sciences related to health for which funds are available under part B of title VII of the act and these regulations;

No official of the Department of Health and Human Services will approve any proposal to modify the terms of a loan guaranteed under title VII of the Public Health Service Act (42 U.S.C. 293 et seq.) and this subpart which would permit the use of the guaranteed loan (or the guarantee) as collateral for an issue of tax-exempt securities.

(Secs. 215 and 726, Public Health Service Act, 58 Stat. 690 and 85 Stat. 432, 42 U.S.C. 216 and 2931, as amended)

[48 FR 42984, Sept. 21, 1983]

Subparts Q-T [Reserved]

Subpart U-Armed Forces Health Professions Scholarship Program

AUTHORITY: Sec. 2(a), Pub. L. 92-426, 86 Stat. 719 (10 U.S.C. 2127(d)).

SOURCE: 38 FR 20447, Aug. 1, 1973, unless otherwise noted.

$57.2001 Applicability.

In the event the Secretary of Defense decides to enter into one or more contracts under 10 U.S.C. 2127(d), the regulations in this subpart outline considerations the Secretary of Defense will take into account in determining whether an accredited civilian educational institution has increased its total enrollment for the sole purpose of accepting members of the Armed Forces health professions scholarship program.

§ 57.2002 Definitions.

As used in this subpart:

(a) Institution means a college, university, or other institution or a department, division, or other administrative unit within a college, university, or other institution, which provides primarily or exclusively a course of study in medicine, dentistry, or other health profession, as determined under regulations prescribed by the Secretary of Defense, leading to a degree in one of said health professions, and which is accredited by an accrediting agency or association recognized by the United States Commissioner of Education.

(b) Enrollment in any fiscal year means the number of full-time students enrolled in an institution on October 15 of said year and pursuing a course of study which constitutes a full-time academic workload, as determined by the institution, leading to a degree in medicine, dentistry, or other health profession, as determined under regulations prescribed by the Secretary of Defense: Provided, That if the Secretary of Defense finds that a date other than October 15 would more accurately reflect an institution's enrollment in any fiscal year, the Secretary of Defense may use such other date in place of October 15 in making his determination under this subpart.

(c) Fiscal year means the Federal fiscal year beginning July 1 and ending on the following June 30.

(d) Program means the Armed Forces health professions scholarship program established under section 2(a) of the Uniformed Services Health Professions Revitalization Act of 1972 (86 Stat. 713, Pub. L. 92-426), and codified in chapter 105 of 10 U.S.C.

$57.2003 Determinations of increased enrollment solely for the program.

In the event the Secretary of Defense decides to enter into one or more contracts under 10 U.S.C. 2127(d), his determination as to whether an institution has increased its total enrollment in any fiscal year for the sole purpose of accepting members of the program will take into account the following considerations:

(a) A comparison of the total enrollment in said fiscal year with the total

enrollments in immediately preceding fiscal years;

(b) Any increases in enrollment to which the institution has directly or indirectly committed itself in said fiscal year under: (1) Other Federal programs, such as those set forth in title VII and VIII of the Public Health Service Act (42 U.S.C. 292 et seq.), the Veterans' Administration Medical School Assistance and Health Manpower Training Act of 1972 (Pub. L. 92-541, 86 Stat. 1100 (38 U.S.C. 5070 et seq.)) and section 225 of the Public Health Service Act (sec. 5, Pub. L. 92-585, 86 Stat. 1293 (42 U.S.C. 234)); (2) programs of State or local governments or other public or private agencies, or (3) any legally binding arrangement: Provided, That insofar as a single increase may be applied to satisfy the commitments under two or more programs and/or other arrangements, said increase shall be considered to meet all such commitments;

(c) Any unusual factors, such as: (1) An institution having been newly established or (2) an institution experiencing what is for it an abnormal rate of attrition and/or admission.

Subpart V [Reserved]

Subpart W-Physician Shortage Area Scholarship Grants

AUTHORITY: Sec. 215, 58 Stat. 690, as amended (42 U.S.C. 216).

SOURCE: 39 FR 28730, Aug. 9, 1974, unless otherwise noted.

$57.2201 Applicability.

The regulations of this subpart are applicable to scholarship grants awarded under section 784 of the Public Health Service Act, which authorizes the Secretary to award scholarship grants to students of medicine and osteopathy who agree to engage in the full-time practice of primary care for a prescribed period of time (a) in a physician shortage area or (b) in such manner as to assure that of the patients receiving medical care in such practice a substantial portion will consist of migratory agricultural workers or members of their families.

$57.2202 Definitions.

As used in this subpart, the following terms shall have the following meanings:

(a) Act means the Public Health Service Act, as amended.

(b) Secretary means the Secretary of Health and Human Services and any other officer or employee of the Department of Health and Human Services to whom the authority involved has been delegated.

(c) School means a public or other nonprofit school of medicine or osteopathy which provides a course of study, or a portion thereof, which leads respectively to a degree of Doctor of Medicine or Doctor of Osteopathy and which is accredited as provided in section 721(b)(1)(B) of the Act.

(d) Scholarship grant means the amount of money awarded to an individual by the Secretary for an academic year pursuant to section 784(a) of the Act.

(e) Full-time student means a student who is enrolled, or accepted for enrollment, in a school and pursuing a course of study which constitutes a full-time academic workload, as determined by the school, leading to a degree specified in paragraph (c) of this section.

(f) Academic year means the traditional, approximately 9-month September to June annual session. For the purpose of computing academic year equivalents for students who, during a 12-month period, attend for a longer period than the traditional academic year, the academic year will be considered to be of 9 months' duration.

(g) National of the United States means (1) a citizen of the United States or (2) a person who, though not a citizen of the United States, owes permanent allegiance to the United States (8 U.S.C. 1101(a)(22)).

(h) Professional training means the course of study leading to the degree of doctor of medicine or doctor of osteopathy, plus a period, not to exceed a total of four years, of internship and residency training.

(i) Low-income background as applied to any individual means that the individual comes from a family with an annual income below low-income levels developed pursuant to §57.605(c).

(j) The practice of primary care means the provision of health services characterized by the delivery of first contact medicine, the assumption of longitudinal responsibility for the patient regardless of the presence or absence of disease, and the integration of the physical, psychological and social aspects of health care to the limits of the capability of the practitioner. For purposes of this section, primary care shall include the fields of general practice, family practice, general internal medicine, general pediatrics, and general obstetrics and gynecology.

(k) Migratory agricultural worker means a domestic agricultural migratory worker as defined in § 56.102(d).

(1) Physician shortage area means an area designated by the Secretary pursuant to §57.216(a)(5) as an area having a need for and shortage of physicians.

§ 57.2203 Eligibility.

To be eligible for a scholarship grant under this subpart, the applicant must:

(a) Be a national of the United States or a permanent resident of the Trust Territory of the Pacific Islands or a lawful permanent resident of the United States, Puerto Rico, the Virgin Islands or Guam;

(b) Be a full-time student in a school located in the United States, the Trust Territory of the Pacific Islands, Puerto Rico, the Virgin Islands, the Canal Zone, American Samoa or Guam; and

(c) Agree to engage in the full-time practice of primary care as defined in § 57.2202(j) in accord with conditions specified in § 57.2209.

§ 57.2204 Application.

Each eligible applicant desiring a scholarship grant under this subpart shall submit an application at such time and in such form as the Secretary may prescribe.

$57.2205 Priority for selection of

scholarship recipients.

(a) When funds determined by the Secretary to be available for scholarship grants under this subpart are insufficient to permit the awarding of scholarships to all individuals applying therefor, the Secretary shall accord priority to eligible applicants as follows:

(1) First priority for scholarship grants shall be accorded to applicants who (i) are from a low-income background as defined in §57.2202 (i), (ii) reside in a physician shortage area and (iii) agree to return to such area and engage in the full-time practice of primary care. For purposes of this paragraph, an individual resides in a physician shortage area if he presently is residing in such an area or if he (or his parents) resided in such an area in the year prior to his admission to an institution of higher education.

(2) Second priority shall be accorded to applicants meeting the criteria in paragraphs (a)(1) (ii) and (iii) of this section.

(3) Third priority shall be accorded to applicants meeting the criterion in paragraph (a)(1)(i) of this section.

(4) Fourth priority shall be accorded to other applicants.

(b) Where there are insufficient funds available to make scholarship grants to all members of any single priority grouping enumerated in paragraph (a) of this section, the following criteria will be used to accord priority within each affected priority group:

(1) Within the priority groupings specified in paragraphs (a) (1) and (2) of this section, the Secretary shall rank recipients according to the degree of the severity of shortage of physicians practicing primary care in such area. Scholarship grants shall be awarded within each priority group first to applicants within that grouping from physician shortage areas with the least favorable ratio of such physicians to the population to be served.

(2) Within the priority groupings specified in paragraphs (a) (3) and (4) of this section, the Secretary shall award scholarship grants within each priority group first to applicants who agree to practice primary care in a physician shortage area with a substantial portion of migratory agricultural workers in such area; second, to applicants within that grouping who agree to practice in a physician shortage area; and third, to applicants within that grouping who agree to practice in such place or places, facility or facilities, and in such manner as the Secretary finds necessary to assure that, of the patients receiving medical care in such