A. The board may grant loans from the medical student loan fund established by section 15-1725 to defray the expenses of the medical education of those students at a public or private school of medicine in this state who intend to enter and complete a residency program approved by the accreditation council for graduate medical education or by the American osteopathic association and who are deemed qualified by the board to receive such loans. Loans shall be granted on such terms and conditions as may be imposed by the board and shall be distributed on a first-come, first-served basis. One of the qualifications shall be Arizona residency, which shall be determined according to the same criteria prescribed for in-state student status in section 15-1802.

B. The loans granted by the board shall provide for each student tuition plus a living allowance. Beginning in 2006-2007 and continuing each year thereafter, the living allowance shall be not more than $20,000 for each student per year adjusted by the percentage change in the GDP price deflator from the second preceding calendar year to the calendar year immediately preceding the current year.

C. The board shall make a full and careful investigation of the ability, character and qualification of each applicant through a written application and interview process and determine the applicant’s fitness to become a loan recipient. The investigation of each applicant shall include an examination of the ability of the applicant to pay the expenses of a medical education. The board shall give preference to qualified applicants who demonstrate a strong commitment to seek a residency program in this state, who intend to become board certified in family practice, general pediatrics, obstetrics and gynecology, general internal medicine or combined medicine and pediatrics or any other specialty approved by the board and who demonstrate a commitment to practice medicine in this state and to serve in an area listed in subsection E of this section.

D. The services to be performed are service to the state by practicing general practice or any specialty approved by the board in an area listed in subsection E of this section. Service by practicing another specialty of recognized need in this state is allowed only following written approval by the board. The service location is subject to approval by the board.

E. The board may approve service in any of the following locations:

1. A rural and medically underserved area of this state.

2. A medically underserved area of this state.

3. A medically underserved population of this state.

4. Any Indian reservation that is located in this state.

F. The board may specify an area listed in subsection E of this section in the student’s contract to allow the student to seek employment in that area as a physician. After the area is specified by the board, that area shall be designated in the student’s subsequent contracts as an approved area and as an approved service location.

G. The board shall collect and maintain data on the retention of doctors who practice in an area listed in subsection E of this section. The board shall collect this data for at least ten years after each loan recipient completes the recipient’s service commitment.

H. Private schools of medicine shall reimburse the university of Arizona for any administrative costs related to processing loans for students at private schools of medicine pursuant to subsection A of this section.