A. Each applicant who is approved for a loan by the board may be granted a loan for a period of up to five years.

B. The loans shall bear interest at the rate of seven percent per year.

C. Each loan shall be evidenced by a contract between the student and the board, acting on behalf of this state. The contract shall provide for the payment by the state of a stated sum or sums defraying the costs of a medical education at a public or private school of medicine in this state and shall be conditioned on the contractual agreement by the recipient of such loan to complete the service required by section 15-1723. The contract shall provide that the recipient serving as a physician in an area listed in section 15-1723, subsection E may receive compensation from the board for such service and other services designated in the contract. This compensation shall be credited against amounts due under the loan and shall not exceed the amount of the loan and any interest accrued on the loan. Such service shall be full time as determined by the board and shall be for two years or one year of service for each year of loan support, whichever is longer. A loan and the interest accrued on the loan may be fully paid with compensation received for services as required by the contract or at the option of the recipient by payment of all monies, interest and penalties for failure to fulfill the contract.

D. A loan recipient shall begin the service for which the recipient contracted as a condition of the loan within three years after completing the recipient’s undergraduate medical education unless extended to four years by the board or within three months after finishing or leaving a residency program. A recipient who is ordered into military service or for other cause beyond the recipient’s control deemed sufficient by the board is unable to commence the required service within three years after such graduation shall begin service within one year after completing military service or the termination of such other cause.

E. If a recipient decides not to fulfill the conditions of the contract by serving in an area listed in section 15-1723, subsection E, the contract shall provide that the recipient be required to repay the full amount borrowed, including tuition, at the seven percent interest rate plus a penalty for liquidated damages as specified in subsection F of this section, minus the amount credited for time actually served in a site approved by the board, to be calculated on a prorated monthly basis. The board for good reason may provide for extensions of the period of repayment specified in the loan recipient’s contract. The board may waive the payment of principal, interest and penalty for liquidated damages if it determines that death or permanent physical disability accounts for the recipient’s failure to fulfill the contract.

F. A recipient who does not fulfill the conditions of the contract shall pay the full amount borrowed and seven percent interest plus the following penalty for liquidated damages:

1. If the recipient withdraws from the program while in medical school, there is no penalty for liquidated damages.

2. If the recipient withdraws from the program during residency, an amount equal to ten percent of the loan amount.

3. If the recipient withdraws from the program while serving as a physician in the area listed in the recipient’s contract, an amount equal to twenty-five percent of the loan amount.

G. On receipt of supporting documentation, the board for good cause shown may defer the recipient’s service or payment obligation or may enter into repayment arrangements with the recipient or allow service that is equivalent to full-time service if the board determines that this action is justified after a review of the individual’s circumstances. At the discretion of the board, the board may allow service by practicing another specialty of recognized need in this state that is not specified in the student’s contract, but only following prior written approval by the board.

H. The attorney general may commence whatever actions are necessary to enforce the contract and achieve repayment of loans provided by the board pursuant to this article.