Interest at the rate of nine and one-half percent per year shall be charged on all loans made under sections 191.500 to 191.550 but one-fourth of the interest and principal of the total loan at the time of the awarding of the degree shall be forgiven for each year of participation by an applicant in the practice of his profession in a rural area or an area of defined need. The department shall grant a deferral of interest and principal payments to a loan recipient who is pursuing an internship or a residency in primary care. The deferral shall not exceed three years. The status of each loan recipient receiving a deferral shall be reviewed annually by the department to ensure compliance with the intent of this provision. The loan recipient will repay the loan beginning with the calendar year following completion of his internship or his primary care residency in accordance with the loan contract.