I
103D CONGRESS
2D SESSION
H. R. 4688
To amend the Internal Revenue Code of 1986, the Public Health Service
Act, and certain other Acts to provide for an increase in the number
of health professionals serving in rural areas.
IN THE HOUSE OF REPRESENTATIVES
JUNE 30, 1994
Ms. LAMBERT introduced the following bill; which was referred jointly to the
Committees on Energy and Commerce, Ways and Means, and Education
and Labor
A BILL
To amend the Internal Revenue Code of 1986, the Public
Health Service Act, and certain other Acts to provide
for an increase in the number of health professionals
serving in rural areas.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Rural Health Care Practitioners Revitalization Act of
1994’’.
(b) TABLE OF CONTENTS.—The table of contents for
this Act is as follows:
Sec. 1. Short title; table of contents.
TITLE I—TAX INCENTIVES REGARDING RURAL HEALTH
CARE
Sec. 101. National Health Service Corps loan repayments excluded from gross
income.
Sec. 102. Deduction for medical school education loan interest incurred by
health professionals serving in medically underserved rural
areas.
Sec. 103. Nonrefundable credit for certain primary health services providers.
Sec. 104. Expensing of medical equipment.
TITLE II—PUBLIC HEALTH SERVICE PROGRAMS
REGARDING RURAL HEALTH CARE
Subtitle A—National Health Service Corps
PART 1—GENERAL CORPS PROGRAM
Sec. 201. Designation of health professional shortage areas.
Sec. 202. Funding for special loans for former Corps members to enter private
practice in health professional shortage areas.
Sec. 203. Assignment of Corps personnel; priority for rural medical facilities
providing experience regarding health professions as career
choice.
PART 2—SCHOLARSHIP AND LOAN REPAYMENT PROGRAMS
Sec. 211. Provision regarding increase in funding.
Sec. 212. Priority for certain individuals from rural backgrounds.
PART 3—LOW-INTEREST LOANS REGARDING OBLIGATED SERVICE IN
UNDERSERVED RURAL AREAS
Sec. 221. Establishment of program of loans.
Subtitle B—Other Programs Regarding Rural Health Care
Sec. 231. State offices of rural health.
Sec. 232. Area health education center programs; authorization of appropria-
tions.
TITLE III—STATE HEALTH SERVICE CORPS
DEMONSTRATION PROJECTS
Sec. 301. Purpose.
Sec. 302. State health service corps demonstration projects.
TITLE IV—TREATMENT OF STUDENT LOANS FOR HEALTH
PROFESSIONALS
Sec. 401. Loans under Higher Education Act of 1965; deferments regarding
postgraduate primary-care programs in underserved rural
areas.
TITLE I—TAX INCENTIVES RE-
GARDING 
RURAL 
HEALTH
CARE
SEC. 101. NATIONAL HEALTH SERVICE CORPS LOAN REPAY-
MENTS EXCLUDED FROM GROSS INCOME.
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
items specifically excluded from gross income) is amended
by redesignating section 137 as section 138 and by insert-
ing after section 136 the following new section:
‘‘SEC. 137. NATIONAL HEALTH SERVICE CORPS LOAN RE-
PAYMENTS.
‘‘(a) GENERAL RULE.—Gross income shall not in-
clude any qualified loan repayment.
‘‘(b) QUALIFIED LOAN REPAYMENT.—For purposes
of this section, the term ‘qualified loan repayment’ means
any payment made on behalf of the taxpayer by the Na-
tional Health Service Corps Loan Repayment Program
under section 338B(g) of the Public Health Service Act.’’.
(b) CONFORMING AMENDMENT.—Paragraph (3) of
section 338B(g) of the Public Health Service Act is
amended by striking ‘‘Federal, State, or local’’ and insert-
ing ‘‘State or local’’.
(c) CLERICAL AMENDMENT.—The table of sections
for part III of subchapter B of chapter 1 of the Internal
Revenue Code of 1986 is amended by striking the item
relating to section 137 and inserting the following:
‘‘Sec. 137. National Health Service Corps loan repayments.
‘‘Sec. 138. Cross references to other Acts.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to payments made under section
338B(g) of the Public Health Service Act after the date
of the enactment of this Act.
SEC. 102. DEDUCTION FOR MEDICAL EDUCATION LOAN IN-
TEREST 
INCURRED 
BY 
HEALTH 
PROFES-
SIONALS SERVING IN MEDICALLY UNDER-
SERVED RURAL AREAS.
(a) IN GENERAL.—Paragraph (1) of section 163(h)
of the Internal Revenue Code of 1986 (relating to dis-
allowance of deduction for personal interest) is amended
by striking ‘‘and’’ at the end of subparagraph (D), by re-
designating subparagraph (E) as subparagraph (F), and
by inserting after subparagraph (D) the following new
subparagraph:
‘‘(E) any qualified medical education loan
interest (within the meaning of paragraph (5)),
and’’.
(b) QUALIFIED MEDICAL EDUCATION LOAN INTER-
EST DEFINED.—Subsection (h) of section 163 of such
Code is amended by redesignating paragraph (5) as para-
graph (6) and by inserting after paragraph (4) the follow-
ing new paragraph:
‘‘(5) QUALIFIED MEDICAL EDUCATION LOAN IN-
TEREST.—
‘‘(A) IN
GENERAL.—The term ‘qualified
medical education loan interest’ means inter-
est—
‘‘(i) which is on a medical education
loan of a health professional,
‘‘(ii) which is paid or accrued by such
health professional, and
‘‘(iii) which accrues during the pe-
riod—
‘‘(I) such health professional is
providing care to residents of a medi-
cally underserved rural area, and
‘‘(II) such health professional’s
principal place of abode is in such
area.
In the case of a health professional who is a
physician, the requirement of clause (iii)(I)
shall be met only if such physician is providing
primary care (including internal medicine, pedi-
atrics, obstetrics/gynecology, family medicine,
and osteopathy) to such residents.
‘‘(B) MEDICAL
EDUCATION
LOAN.—For
purposes of subparagraph (A), the term ‘medi-
cal education loan’ means indebtedness incurred
to pay the individual’s—
‘‘(i) qualified tuition and related ex-
penses (as defined in section 117(b)) in-
curred for the medical education of such
individual, or
‘‘(ii) reasonable living expenses while
away from home in order to attend an edu-
cational institution described in section
170(b)(1)(A)(ii) for the medical education
of such individual.
‘‘(C) HEALTH
PROFESSIONAL.—For pur-
poses of subparagraph (A), the term ‘health
professional’ means any physician, physician as-
sistant, nurse practitioner, nurse clinician,
nurse midwife, and allied health professional.
‘‘(C) PHYSICIAN.—For purposes of this
paragraph, the term ‘physician’ has the mean-
ing given such term by section 1861(r)(1) of
the Social Security Act.
‘‘(D) PHYSICIAN ASSISTANT; NURSE PRAC-
TITIONER.—For purposes of this paragraph,
the terms ‘physician assistant’ and ‘nurse prac-
titioner’ have the meanings given to such terms
by section 1861(aa)(3) of the Social Security
Act.
‘‘(E) ALLIED
HEALTH
PROFESSIONAL.—
For purposes of this paragraph, the term ‘allied
health professional’ has the meaning given such
term by section 799(5) of the Public Health
Service Act.
‘‘(F) MEDICALLY
UNDERSERVED
RURAL
AREA.—For purposes of subparagraph (A), the
term ‘medically underserved rural area’ means
any rural area which is a medically underserved
area (as defined in section 330(b) or 1302(7) of
the Public Health Service Act).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years ending after the
date of the enactment of this Act.
SEC. 103. NONREFUNDABLE CREDIT FOR CERTAIN PRI-
MARY HEALTH SERVICES PROVIDERS.
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 (relating to nonrefundable personal credits) is
amended by inserting after section 25 the following new
section:
‘‘SEC. 25A. PRIMARY HEALTH SERVICES PROVIDERS.
‘‘(a) ALLOWANCE
OF CREDIT.—In the case of a
qualified primary health services provider, there is allowed
as a credit against the tax imposed by this chapter for
any taxable year in a mandatory service period an amount
equal to the product of—
‘‘(1) the lesser of—
‘‘(A) the number of months of such period
occurring in such taxable year, or
‘‘(B) 36 months, reduced by the number of
months taken into account under this para-
graph with respect to such provider for all pre-
ceding taxable years (whether or not in the
same mandatory service period), multiplied by
‘‘(2) $1,000 ($500 in the case of a qualified
primary health services provider who is a physician
assistant or a nurse practitioner).
‘‘(b) QUALIFIED PRIMARY HEALTH SERVICES PRO-
VIDER.—For purposes of this section, the term ‘qualified
primary health services provider’ means any physician,
physician assistant, nurse practitioner, nurse clinician, or
nurse midwife who for any month during a mandatory
service period is certified by the Bureau to be a primary
health services provider who—
‘‘(1) is providing primary health services—
‘‘(A) full time, and
‘‘(B) to individuals at least 80 percent of
whom reside in a rural health professional
shortage area,
‘‘(2) is not receiving during such year a scholar-
ship under the National Health Service Corps Schol-
arship Program or a loan repayment under the Na-
tional Health Service Corps Loan Repayment Pro-
gram,
‘‘(3) is not fulfilling service obligations under
such Programs, and
‘‘(4) has not defaulted on such obligations.
‘‘(c) MANDATORY SERVICE PERIOD.—For purposes
of this section, the term ‘mandatory service period’ means
the period of 60 consecutive calendar months beginning
with the first month the taxpayer is a qualified primary
health services provider.
‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) BUREAU.—The term ‘Bureau’ means the
Bureau of Health Care Delivery and Assistance,
Health Resources and Services Administration of the
United States Public Health Service.
‘‘(2) PHYSICIAN.—The term ‘physician’ has the
meaning given to such term by section 1861(r) of
the Social Security Act.
‘‘(3) PHYSICIAN
ASSISTANT; NURSE
PRACTI-
TIONER.—The terms ‘physician assistant’ and ‘nurse
practitioner’ have the meanings given to such terms
by section 1861(aa)(3) of the Social Security Act.
‘‘(4) PRIMARY HEALTH SERVICES PROVIDER.—
The term ‘primary health services provider’ means a
provider of primary health services (as defined in
section 330(b)(1) of the Public Health Service Act).
‘‘(5) RURAL HEALTH PROFESSIONAL SHORTAGE
AREA.—The term ‘rural health professional shortage
area’ means—
‘‘(A) a rural health professional shortage
area (as defined in section 332(a)(1)(A) of the
Public Health Service Act) in a rural area (as
determined under section 1886(d)(2)(D) of the
Social Security Act),
‘‘(B) an area which is determined by the
Secretary of Health and Human Services as
equivalent to an area described in subparagraph
(A) and which is designated by the Bureau of
the Census as not urbanized, or
‘‘(C) a community that is certified as un-
derserved by the Secretary for purposes of par-
ticipation in the rural health clinic program
under title XVIII of the Social Security Act.
‘‘(e) RECAPTURE OF CREDIT.—
‘‘(1) IN GENERAL.—If, during any taxable year,
there is a recapture event, then the tax of the tax-
payer under this chapter for such taxable year shall
be increased by an amount equal to the product of—
‘‘(A) the applicable percentage, and
‘‘(B) the aggregate unrecaptured credits
allowed to such taxpayer under this section for
all prior taxable years.
‘‘(2) APPLICABLE RECAPTURE PERCENTAGE.—
‘‘(A) IN GENERAL.—For purposes of this
subsection, the applicable recapture percentage
shall be determined from the following table:
‘‘If the recapture
The applicable recap-
event occurs during:
ture percentage is:
Months 1–24 ..............................................
100
Months 25–36 ............................................
Months 37–48 ............................................
Months 49–60 ............................................
Months 61 and thereafter ..........................
0.
‘‘(B) TIMING.—For purposes of subpara-
graph (A), month 1 shall begin on the first day
of the mandatory service period.
‘‘(3) RECAPTURE EVENT DEFINED.—
‘‘(A) IN GENERAL.—For purposes of this
subsection, the term ‘recapture event’ means
the failure of the taxpayer to be a qualified pri-
mary health services provider for any month
during any mandatory service period.
‘‘(B) CESSATION
OF
DESIGNATION.—The
cessation of the designation of any area as a
rural health professional shortage area after the
beginning of the mandatory service period for
any taxpayer shall not constitute a recapture
event.
‘‘(C) SECRETARIAL
WAIVER.—The Sec-
retary may waive any recapture event caused by
extraordinary circumstances.
‘‘(4) NO CREDITS AGAINST TAX.—Any increase
in tax under this subsection shall not be treated as
a tax imposed by this chapter for purposes of deter-
mining the amount of any credit under subpart A,
B, or D of this part.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for subpart A of part IV of subchapter A of chapter 1
of such Code is amended by inserting after the item relat-
ing to section 25 the following new item:
‘‘Sec. 25A. Primary health services providers.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
the date of the enactment of this Act.
SEC. 104. EXPENSING OF MEDICAL EQUIPMENT.
(a) IN GENERAL.—Section 179 of the Internal Reve-
nue Code of 1986 (relating to election to expense certain
depreciable business assets) is amended—
(1) by striking paragraph (1) of subsection (b)
and inserting the following:
‘‘(1) DOLLAR LIMITATION.—
‘‘(A) GENERAL RULE.—The aggregate cost
which may be taken into account under sub-
section (a) for any taxable year shall not exceed
$17,500.
‘‘(B) RURAL HEALTH CARE PROPERTY.—
In the case of rural health care property, the
aggregate cost which may be taken into account
under subsection (a) for any taxable year shall
not exceed $25,000, reduced by the amount
otherwise taken into account under subsection
(a) for such year.’’; and
(2) by adding at the end of subsection (d) the
following new paragraph:
‘‘(11) RURAL HEALTH CARE PROPERTY.—For
purposes of this section, the term ‘rural health care
property’ means section 179 property used by a phy-
sician (as defined in section 1861(r) of the Social
Security Act) in the active conduct of such physi-
cian’s full-time trade or business of providing pri-
mary health services (as defined in section 330(b)(1)
of the Public Health Service Act) in a rural health
professional shortage area (as defined in section
25A(d)(5)).’’.
(b) EFFECTIVE DATE.—The amendments made by
this subsection shall apply to property placed in service
in taxable years beginning after the date of the enactment
of this Act.
TITLE II—PUBLIC HEALTH SERV-
ICE PROGRAMS REGARDING
RURAL HEALTH CARE
Subtitle A—National Health
Service Corps
PART 1—GENERAL CORPS PROGRAM
SEC. 
201. 
DESIGNATION 
OF 
HEALTH 
PROFESSIONAL
SHORTAGE AREAS.
Section 332(b) of the Public Health Service Act (42
U.S.C. 254e(b)) is amended by adding at the end the fol-
lowing paragraph:
‘‘(4) With respect to determining the need for
health services through the indicators of need under
paragraphs (1) and (2), consideration of the follow-
ing:
‘‘(A) The number of individuals in the pop-
ulation involved whose means of payment for
health services is the program under title XVIII
of the Social Security Act.
‘‘(B) The number of individuals in the
population whose means of payment for health
services is the program under title XIX of such
Act.
‘‘(C) The number of individuals in the pop-
ulation who are uninsured with respect to
health policies or plans.
‘‘(D) The percentage of the population
constituted by the aggregate number of individ-
uals under subparagraphs (A) through (C).
‘‘(E) In the case of community-based phy-
sicians who provide primary health services and
who are accepting additional patients whose
means of payment is through the program es-
tablished in title XVIII or XIX of the Social
Security Act, the percentage constituted by the
ratio of the number of such physicians to the
number of individuals in the population.’’.
SEC. 202. FUNDING FOR SPECIAL LOANS FOR FORMER
CORPS MEMBERS TO ENTER PRIVATE PRAC-
TICE IN HEALTH PROFESSIONAL SHORTAGE
AREAS.
(a) IN GENERAL.—
(1) ALLOCATION.—Section 338(a) of the Public
Health Service Act (42 U.S.C. 254k(a)) is amended
by adding at the end the following paragraph:
‘‘(3) Of the amounts appropriated under paragraph
(1) for a fiscal year, the Secretary shall reserve not less
than 5 percent for carrying out section 338G.’’.
(2) 
CONFORMING
AMENDMENT.—Section
338G(a) of the Public Health Service Act (42
U.S.C. 254p(a)) is amended in the matter preceding
paragraph (1) by striking ‘‘authorized under section
338’’ 
and 
inserting 
‘‘reserved 
under 
section
338(a)(3)’’.
(b) STUDY.—
(1) IN GENERAL.—During the fiscal years 1996
through 2000, the Secretary shall conduct a study
for the purpose of determining the extent to which
the program under section 338G of the Public
Health Service Act has been effective in increasing
the number of health professionals who begin private
practice in health professional shortage areas after
terminating the membership of the individuals in the
National Health Service Corps. The study shall sep-
arately state the number of such individuals who
have completed a period of obligated service under
the scholarship or loan repayment program under
section 338A or 338B of such Act, respectively.
(2) DATE
CERTAIN
FOR
COMPLETION.—Not
later than February 1, 2001, the Secretary shall
complete the study required in paragraph (1) and
submit to the Congress a report describing the find-
ings made in the study.
(3) DEFINITIONS.—For purposes of this sub-
section:
(A) The term ‘‘health professional shortage
area’’ has the meaning given such term in sec-
tion 331(a)(3) of the Public Health Service Act.
(B) The term ‘‘Secretary’’ means the Sec-
retary of Health and Human Services.
SEC. 203. ASSIGNMENT OF CORPS PERSONNEL; PRIORITY
FOR RURAL MEDICAL FACILITIES PROVIDING
EXPERIENCE REGARDING HEALTH PROFES-
SIONS AS CAREER CHOICE.
Section 333A(a)(1)(B) of the Public Health Service
Act (42 U.S.C. 254f–1(a)(1)(B)) is amended—
(1) in clause (iii), by striking ‘‘and’’ after the
semicolon at the end;
(2) in clause (iv), by adding ‘‘and’’ after the
semicolon at the end; and
(3) by adding at the end the following clause:
‘‘(v) in the case of entities providing
health services in rural areas, is operating
a program for students of rural secondary
schools or institutions of higher education
under which program the students are pro-
vided with opportunities to visit or work at
rural hospitals (or other rural health facili-
ties) for the purpose of gaining experience
regarding a career in a field of primary
health care;’’.
PART 2—SCHOLARSHIP AND LOAN REPAYMENT
PROGRAMS
SEC. 211. PROVISION REGARDING INCREASE IN FUNDING.
Section 338H(b)(1) of the Public Health Service Act
(42 U.S.C. 254q(b)(1)) is amended—
(1) by striking ‘‘and’’ after ‘‘1991,’’;
(2) by striking ‘‘through 2000’’ and inserting
‘‘through 1994,’’; and
(3) by inserting before the period the following:
‘‘$150,000,000 for fiscal year 1995, and such sums
as may be necessary for each of the fiscal years
1996 through 2000’’.
SEC. 212. PRIORITY FOR CERTAIN INDIVIDUALS FROM
RURAL BACKGROUNDS.
(a) SCHOLARSHIP PROGRAM.—Section 338A(d) of
the Public Health Service Act (42 U.S.C. 254l(d)) is
amended—
(1) in paragraph (2), in the matter preceding
subparagraph (A), by inserting ‘‘, subject to para-
graph (3),’’ after ‘‘shall’’; and
(2) by adding at the end the following para-
graph:
‘‘(3)(A) Of individuals receiving priority under para-
graph (2)(B), the Secretary shall give further priority to
any individual who has resided in a rural area for a signifi-
cant number of years and who has characteristics indicat-
ing the individual will, after the period of obligated service,
serve in a rural health professional shortage area.
‘‘(B) Factors considered by the Secretary in deter-
mining priorities for purposes of subparagraph (A) shall
include consideration of whether the health professions
school attended (or to be attended) by the individual in-
volved is a school whose graduates include a significant
number of health professionals who are serving in rural
areas.’’.
(b) LOAN REPAYMENT PROGRAM.—Section 338B(d)
of the Public Health Service Act (42 U.S.C. 254l–1(d))
is amended—
(1) in paragraph (2), in the matter preceding
subparagraph (A), by inserting ‘‘, subject to para-
graph (3),’’ after ‘‘shall’’; and
(2) by adding at the end the following para-
graph:
‘‘(3)(A) Of individuals receiving priority under para-
graph (2)(B), the Secretary shall give further priority to
any individual who has resided in a rural area for a signifi-
cant number of years and who has characteristics indicat-
ing the individual will, after the period of obligated service,
serve in a rural health professional shortage area.
‘‘(B) Factors considered by the Secretary in deter-
mining priorities for purposes of subparagraph (A) may
include consideration of whether the health professions
school attended by the individual involved is a school
whose graduates include a significant number of health
professionals who are serving in rural areas.’’.
PART 3—LOW-INTEREST LOANS REGARDING OB-
LIGATED SERVICE IN UNDERSERVED RURAL
AREAS
SEC. 221. ESTABLISHMENT OF PROGRAM OF LOANS.
Subpart III of part D of title III of the Public Health
Service Act (42 U.S.C. 254l et seq.) is amended by adding
at the end the following section:
‘‘SEC. 338M. LOAN FUND REGARDING OBLIGATED SERVICE
IN UNDERSERVED RURAL AREAS.
‘‘(a) ESTABLISHMENT OF RURAL PRIMARY HEALTH
CARE FUND.—There is established in the Treasury of the
United States a fund to be known as the Rural Primary
Health Care Fund (in this section referred to as the
‘Fund’). The Fund shall consist of such amounts as may
be appropriated under subsection (f) (and such amounts
as may be appropriated in subsections (d) and (e)(3)).
Amounts appropriated to the Fund are available until ex-
pended.
‘‘(b) EXPENDITURES FROM FUND.—Amounts in the
Fund are available to the Secretary for the purpose of car-
rying out subsection (c), subject to the extent of amounts
made available in advance in appropriations Acts.
‘‘(c) LOW-INTEREST LOANS FOR ATTENDANCE AT
HEALTH PROFESSIONS SCHOOLS; OBLIGATED SERVICE
REGARDING UNDERSERVED RURAL AREAS.—
‘‘(1) IN GENERAL.—
‘‘(A) Subject to the provisions of this sub-
section, the Secretary may, from amounts avail-
able under subsection (b), make loans to assist
individuals with the costs of attending health
professions schools if the individuals agree to
provide primary health services in an under-
served rural area.
‘‘(B) For purposes of this subsection, the
term ‘underserved rural area’ means a rural
area with a shortage of personal health services,
except that such term does not include any
health professional shortage area.
‘‘(C) The Secretary shall issue criteria for
determining whether an area is an underserved
rural area.
‘‘(2) CERTAIN REQUIREMENTS.—The Secretary
may make a loan under paragraph (1) to an individ-
ual only if the following conditions are met:
‘‘(A) The individual is enrolled (or accept-
ed for enrollment) as a full-time student in a
course of study or program leading to a degree
in medicine, osteopathic medicine, dentistry, or
other health profession, and such course or pro-
gram is offered by an accredited educational in-
stitution (as determined by the Secretary) and
is approved by the Secretary.
‘‘(B) The individual is eligible for, or
holds, an appointment as a commissioned offi-
cer in the Regular or Reserve Corps of the
Service or is eligible for selection for civilian
service in the Corps.
‘‘(C) The individual and the Secretary
enter into the contract described in paragraph
(3).
‘‘(3) LOAN CONTRACT.—For purposes of para-
graph (2)(C), the contract described in this para-
graph is a written contract containing provisions as
follows:
‘‘(A) The Secretary agrees to provide the
individual involved with loans under paragraph
(1) for a number of academic years (not to ex-
ceed 4 academic years) determined by the indi-
vidual, during which period the individual is
pursuing a course of study or program de-
scribed in paragraph (2)(A).
‘‘(B) The Secretary agrees to accept the
individual into the Corps (or for equivalent
service as otherwise provided in this subpart),
subject to the availability of funds for carrying
out sections 331 through 335.
‘‘(C) The individual agrees as follows:
‘‘(i) To accept the loan.
‘‘(ii) To maintain enrollment in the
course or program involved until the indi-
vidual completes the course or program.
‘‘(iii) While enrolled in the course or
program, to maintain an acceptable level of
academic standing (as determined under
regulations of the Secretary by the edu-
cational institution offering the course or
program).
‘‘(iv) To provide obligated service for
purposes of paragraph (5).
‘‘(v) To other provisions of this sub-
section that are applicable to the individ-
ual, including paragraph (8) (relating to
the breach of the obligations of the individ-
ual under this subsection).
‘‘(D) A provision specifying the purposes
for which the loan will be expended, subject to
paragraph (6)(A), and the amount to be ex-
pended for each of the purposes.
‘‘(E) A provision that any financial obliga-
tion of the United States arising out of the con-
tract, and any obligation of the individual under
the contract, is contingent upon funds being
available under subsection (b) for loans under
paragraph (1) and upon funds being available
to carry out the purposes of sections 331
through 335.
‘‘(4) AMOUNT OF LOAN; INTEREST RATE.—The
amount of a loan under paragraph (1) for an aca-
demic year may not exceed $35,000. The rate of in-
terest on the unpaid principal balance of such a loan
may not exceed 4 percent annually, and may not be
less than 2 percent annually.
‘‘(5) PERIOD
OF
OBLIGATED
SERVICE.—For
purposes of paragraph (3)(C)(iv), the obligated serv-
ice of an individual is as follows:
‘‘(A) The service to be provided is the pro-
vision of primary health services.
‘‘(B) The service is to be provided in an
underserved rural area to which the individual
is assigned pursuant to paragraph (10).
‘‘(C) The period of service is the greater of
the following periods:
‘‘(i) 1 year.
‘‘(ii) 1 year for each 2 academic years
for which loans under paragraph (1) are
provided to the individual.
‘‘(iii) 1 year for each $35,000 pro-
vided in such loans to the individual.
‘‘(6) EXPENDITURE OF LOAN.—
‘‘(A) A loan under paragraph (1) to an in-
dividual may be expended only for the following
purposes:
‘‘(i) The tuition of the individual for
the course or program involved for the aca-
demic year involved.
‘‘(ii) Any other reasonable educational
expense, including fees, books, and labora-
tory expenses, incurred by the individual in
the academic year.
‘‘(iii) Reasonable living expenses in-
curred in attending the educational institu-
tion involved, not to exceed the amount in
effect under section 338A(g)(1)(B) for sti-
pends.
‘‘(B) In the case of an educational institu-
tion offering a course or program for which a
loan under paragraph (1) is made, the Sec-
retary may contract with the institution to
make payments to the institution of the
amounts provided for the purposes specified in
clauses (i) and (ii) of subparagraph (A). The
payments may be made to the institution with-
out regard to section 3648 of the Revised Stat-
utes (31 U.S.C. 529).
‘‘(7) REPAYMENT
OF
LOAN; DEFERMENTS.—
The provisions of subparagraphs (B) and (C) of sec-
tion 705(a)(2) apply to loans under paragraph (1) to
the same extent and in the same manner as such
provisions apply to loans under subpart I of part A
of title VII.
‘‘(8) BREACH OF LOAN CONTRACT.—With re-
spect to an individual who has entered into a written
contract under paragraph (3) and who breaches the
contract, an agreement under paragraph (3)(C)(v) is
as follows:
‘‘(A) If, for any reason other than a reason
specified in subparagraph (B), the individual
fails to provide obligated service under para-
graph (5)—
‘‘(i) the balance due on the loan in-
volved will be immediately recomputed
from the date of issuance at an interest
rate of 12 percent per year, compounded
annually; and
‘‘(ii) the recomputed balance will be
paid not later than the expiration of the 3-
year period beginning on the date on which
the individual breaches the contract.
‘‘(B) The individual is liable to the United
States for the amount which has been paid to
or on behalf of the individual under paragraph
(1) if the individual—
‘‘(i) fails to maintain an acceptable
level of academic standing for purposes of
paragraph (3)(C)(iii);
‘‘(ii) is dismissed from the educational
institution involved for disciplinary rea-
sons;
‘‘(iii) voluntarily terminates the course
or program involved before the completion
of the course or program; or
‘‘(iv) fails to accept payment under
the loan under paragraph (1), or instructs
the educational institution not to accept
payment, in whole or in part, of payments
under the loan.
‘‘(9) WAIVER OF OBLIGATIONS; LIMITATION RE-
GARDING BANKRUPTCY.—
‘‘(A) With respect to the obligation of an
individual under a contract under paragraph
(3), the Secretary shall provide for the partial
or total waiver or suspension of the obligation
whenever compliance by the individual is impos-
sible, or would involve extreme hardship to the
individual, and if enforcement of the obligation
with respect to the individual would be uncon-
scionable.
‘‘(B) An obligation of an individual under
the contract under paragraph (3) to make pay-
ments may be released by a discharge in bank-
ruptcy under title 11, United States Code, only
if such discharge is granted after the expiration
of the 5-year period beginning on the first date
that such payment is required (exclusive of any
period in which the obligation to make pay-
ments is suspended), and only if the bankruptcy
court finds that nondischarge of the obligation
would be unconscionable.
‘‘(10) ASSIGNMENT OF CORPS PERSONNEL PUR-
SUANT TO OBLIGATED SERVICE.—The provisions of
section 333 apply to the obligated service of individ-
uals under paragraph (5) with respect to under-
served rural areas to the same extent and in the
same manner as such provisions apply to the obli-
gated service of individuals under section 338A with
respect to health professional shortage areas.
‘‘(11) PRIORITIES IN MAKING LOANS.—
‘‘(A) In making loans under paragraph
(1), the Secretary shall give priority to any in-
dividual (if otherwise a qualified applicant) who
has resided in a rural area for a significant
number of years and who has characteristics in-
dicating the individual will, after the period of
obligated service under paragraph (5), continue
to serve in an underserved rural area.
‘‘(B) Factors considered by the Secretary
in determining priorities for purposes of sub-
paragraph (A) shall include consideration of
whether the health professions school attended
(or to be attended) by the individual involved is
a school whose graduates include a significant
number of health professionals who serve in
rural areas.
‘‘(12) MISCELLANEOUS
PROVISIONS.—Individ-
uals who have entered into written contracts with
the Secretary under this subsection, while under-
going academic training, shall not be counted
against any employment ceiling affecting the De-
partment of Health and Human Services.
‘‘(d) AVAILABILITY OF REPAYMENTS.—Payments of
principal and interest by (or on behalf of) recipients of
loans under subsection (c)(1) are hereby appropriated to
the Fund.
‘‘(e) INVESTMENT.—
‘‘(1) IN
GENERAL.—The Secretary of the
Treasury shall invest such amounts of the Fund as
such Secretary determines are not required to meet
current withdrawals from the Fund. Such invest-
ments may be made only in interest-bearing obliga-
tions of the United States. For such purpose, such
obligations may be acquired on original issue at the
issue price, or by purchase of outstanding obliga-
tions at the market price.
‘‘(2) SALE
OF
OBLIGATIONS.—Any obligation
acquired by the Fund may be sold by the Secretary
of the Treasury at the market price.
‘‘(3) AVAILABILITY OF INCOME.—Any interest
derived from obligations acquired by the Fund, and
proceeds from any sale or redemption of such obliga-
tions, are hereby appropriated to the Fund.
‘‘(f) AUTHORIZATION OF APPROPRIATIONS.—For the
purpose of providing amounts for the Fund, there are au-
thorized to be appropriated $20,000,000 for fiscal year
1995, and such sums as may be necessary for each of the
fiscal years 1996 and 1997.’’.
Subtitle B—Other Programs
Regarding Rural Health Care
SEC. 231. STATE OFFICES OF RURAL HEALTH.
(a) REQUIREMENT REGARDING RECRUITMENT
OF
PHYSICIANS.—Section 338J(c) of the Public Health Serv-
ice Act (42 U.S.C. 254r(c)) is amended—
(1) in paragraph (2), by striking ‘‘and’’ after
the semicolon at the end;
(2) in paragraph (3), by striking the period and
inserting ‘‘; and’’; and
(3) by adding at the end the following para-
graph:
‘‘(4) activities to recruit and retain physicians
to serve in rural areas of the State.’’.
(b) AUTHORIZATIONS OF APPROPRIATIONS.—
(1) IN
GENERAL.—Section 338J(j)(1) of the
Public Health Service Act (42 U.S.C. 254r(j)(1)) is
amended—
(A) by striking ‘‘and’’ after ‘‘1992,’’; and
(B) by inserting before the period the fol-
lowing: ‘‘, and $1,500,000 for each of the fiscal
years 1995 through 1998’’.
(2) 
CONFORMING
AMENDMENT.—Section
338J(k) of the Public Health Service Act (42 U.S.C.
254r(k)) is amended by striking ‘‘$10,000,000’’ and
inserting ‘‘$16,000,000’’.
SEC. 232. AREA HEALTH EDUCATION CENTER PROGRAMS;
AUTHORIZATION OF APPROPRIATIONS.
Section 746(i)(1) of the Public Health Service Act
(42 U.S.C. 293j(i)(1) is amended—
(1) by striking ‘‘is authorized’’ and inserting
‘‘are authorized’’;
(2) by striking ‘‘through 1995’’ and inserting
‘‘and 1994’’; and
(3) by inserting before the period the following:
‘‘, and $50,000,000 for each of the fiscal years 1995
through 1997’’.
TITLE III—STATE HEALTH SERV-
ICE CORPS DEMONSTRATION
PROJECTS
SEC. 301. PURPOSE.
It is the purpose of this title—
(1) to promote recruitment and training of
physicians and other primary care providers from
among 
the 
poor 
and 
from 
disadvantaged
populations;
(2) to place physicians from health professional
shortage areas into similar areas in order to encour-
age retention of physicians in health professional
shortage areas; and
(3) to provide flexibility to States in filling posi-
tions in health professional shortage areas.
SEC. 302. STATE HEALTH SERVICE CORPS DEMONSTRA-
TION PROJECTS.
The Public Health Service Act is amended by insert-
ing after section 338L (42 U.S.C. 254t) the following new
sections:
‘‘SEC. 338M. STATE HEALTH SERVICE CORPS DEMONSTRA-
TION PROJECTS.
‘‘(a) DEFINITIONS.—For purposes of this section:
‘‘(1) AREA HEALTH EDUCATION CENTER.—The
term ‘area health education center’ means—
‘‘(A) a cooperative program of one or more
medical schools (or the parent institutions of
such schools) and one or more nonprofit private
or public area health education centers; or
‘‘(B) a regional or statewide network of
the cooperative programs described in subpara-
graph (A).
‘‘(2) 
HEALTH
PROFESSIONAL
SHORTAGE
AREA.—The term ‘health professional shortage area’
has the meaning provided in section 332(a)(1).
‘‘(3) MEDICAL
SCHOOL.—The term ‘medical
school’ means a school conferring the degree of Doc-
tor of Medicine or Doctor of Osteopathy.
‘‘(4) NONPHYSICIAN
PROVIDER.—The term
‘nonphysician provider’ means an occupational ther-
apist, physical therapist, nurse, nurse midwife, nurse
practitioner, social worker, or optometrist.
‘‘(5) NURSE.—The term ‘nurse’ means a reg-
istered nurse, or an individual with a baccalaureate
or master’s degree in nursing.
‘‘(6) PARENT INSTITUTION.—The term ‘parent
institution’ means any health sciences university
housing a medical school and one or more other
health professions schools.
‘‘(7) PHYSICIAN PROVIDER.—The term ‘physi-
cian provider’ means—
‘‘(A) a physician specializing in general
practice, family medicine, general internal medi-
cine, pediatrics, obstetrics and gynecology, gen-
eral surgery, psychiatry, preventive medicine
and public health, or physiatry; or
‘‘(B) a dentist.
‘‘(8) PROJECT.—The term ‘Project’ means a
State Health Service Corps Demonstration Project
established under subsection (b).
‘‘(9) SERVICE AREA.—The term ‘service area’
means an area designated in subsection (d)(2)(A).
‘‘(b) GRANTS.—The Secretary shall establish a State
Health Service Corps Demonstration Project under which
the Secretary shall make grants to up to 10 States to pay
for the Federal share of the costs of conducting Projects
for the training and employment of eligible participants
as physician and nonphysician providers serving health
professional shortage areas.
‘‘(c) STATE PARTICIPATION.—
‘‘(1) REQUIREMENTS.—In order for a State to
be eligible to receive a grant under this section, the
State shall—
‘‘(A) enter into an agreement with an area
health education center to administer the
Project in accordance with subsection (d);
‘‘(B) provide for evaluation of the Project
in accordance with subsection (e);
‘‘(C) establish a State Health Service
Corps Scholarship Program in accordance with
section 338N; and
‘‘(D) meet such other requirements as the
Secretary may establish for the proper and effi-
cient implementation of the Project.
‘‘(2) GRANT
AWARDS.—In allocating grants
under subsection (b), the Secretary shall give prior-
ity to States that have demonstrated a commitment
to developing and funding area health education cen-
ter programs.
‘‘(3) APPLICATION.—To be eligible to receive a
grant under this section, the State shall submit an
application at such time, in such manner and con-
taining such agreements, assurances, and informa-
tion as the Secretary determines to be necessary to
carry out this section. At a minimum, the applica-
tion shall contain—
‘‘(A) information specifying the actions the
State will take against individuals, and the
methods the State will use to recover all funds
paid under section 338N(i) to individuals, who
breach contracts described in section 338N(g);
and
‘‘(B) assurances that the State will reim-
burse the Secretary for all funds recovered from
individuals who breach contracts described in
section 338N(g).
‘‘(4) DURATION.—A Project under this section
shall be for a maximum duration of 8 years, plus up
to 6 months for final evaluation and reporting.
‘‘(d) STATE AGREEMENTS WITH AREA HEALTH
EDUCATION CENTERS.—
‘‘(1) IN GENERAL.—To be eligible for a grant
under this section, a State shall enter into an agree-
ment with an area health education center for the
planning, development, and operation of a program
to train and employ eligible participants as physician
and nonphysician providers.
‘‘(2) REQUIREMENTS.—Under an agreement
entered into under paragraph (1), an area health
education center shall agree to—
‘‘(A) designate a health professional short-
age area or areas as the service area for the
area health education center;
‘‘(B) provide for or conduct training in
health education services in the service area;
‘‘(C) assess the health professional needs
of the service area and assist in the planning
and development of training programs to meet
the needs;
‘‘(D) provide for or conduct a rotating in-
ternship or residency training program in the
service area;
‘‘(E) provide opportunities for continuing
education to physician and nonphysician provid-
ers practicing within the service area;
‘‘(F) conduct interdisciplinary training and
practice involving physician and nonphysician
providers in the service area;
‘‘(G) arrange and support educational op-
portunities for students studying to become
physician or nonphysician providers at health
facilities, ambulatory care centers, and health
agencies throughout the service area;
‘‘(H) provide for the active participation in
the Project by individuals who are associated
with the administration of the sponsoring
health professions and each of the departments
or specialties of physician or nonphysician pro-
viders (if any) which are offered under the
Project; and
‘‘(I) have an advisory board of which at
least 75 percent of the members shall be indi-
viduals, including both health service providers
and consumers, from the service area.
‘‘(e) EVALUATION.—Not later than March 30, 1998,
and March 30, 2002, each State receiving a grant under
this section shall, through grants to or contracts with pub-
lic and private entities, provide for—
‘‘(1) an evaluation of Projects—
‘‘(A) which were carried out pursuant to
this section during any fiscal year preceding the
fiscal year in which such date occurs, and
‘‘(B) for which no prior evaluation under
this subsection was made, and
‘‘(2) a review of the area health education cen-
ter providing services under the Projects. The eval-
uation shall include an evaluation of the effective-
ness of the Projects in increasing the recruitment
and retention of physician and nonphysician provid-
ers in health professional shortage areas.
‘‘(f) FEDERAL SHARE.—The Federal share of the
costs of any program established under this section with
respect to any State shall be the percentage of such costs
equal to the Federal medical assistance percentage appli-
cable to such State under section 1905(b) of the Social
Security Act. The State may include as a part or all of
the non-Federal share of grants—
‘‘(1) any State funds supporting area health
education centers, and
‘‘(2) the value of in-kind contributions made by
the State, including tuition remission and other ben-
efits for students participating in the State Health
Service Corps Scholarship Program established
under section 338N.
‘‘(g) AUTHORIZATION OF APPROPRIATIONS.—
‘‘(1) IN GENERAL.—There are authorized to be
appropriated for each of the 1994 through 2001 fis-
cal years to carry out the purposes of this section an
amount equal to the product of—
‘‘(A) $250,000, multiplied by
‘‘(B) the number of States receiving grants
under this section for such fiscal year.
Any amount appropriated under this section shall be
available without fiscal year limitation.
‘‘(2) COST RECOVERY.—No more than 10 per-
cent of the funds spent under paragraph (1) may be
used for purposes of recovering funds or taking
other action against individuals who breach the pro-
visions of a contract entered into under section
338N(g).
‘‘SEC. 338N. STATE HEALTH SERVICE CORPS SCHOLARSHIP
PROGRAMS.
‘‘(a) DEFINITIONS.—For purposes of this section:
‘‘(1) AREA HEALTH EDUCATION CENTER.—The
term ‘area health education center’ means—
‘‘(A) a cooperative program of one or more
medical schools (or the parent institutions (as
defined in section 338M(a)(6)) of such schools)
and one or more nonprofit private or public
area health education centers; or
‘‘(B) a regional or statewide network of
the cooperative programs described in subpara-
graph (A).
‘‘(2) GRADUATE EDUCATION.—The term ‘grad-
uate education’ means a course of study at a medi-
cal school or other health professions school leading
to a degree in a field practiced by a physician or
nonphysician provider.
‘‘(3) 
HEALTH
PROFESSIONAL
SHORTAGE
AREA.—The term ‘health professional shortage area’
has the meaning provided in section 332(a)(1).
‘‘(4) MEDICAL
SCHOOL.—The term ‘medical
school’ means a school conferring the degree of Doc-
tor of Medicine or Doctor of Osteopathy.
‘‘(5) NONPHYSICIAN
PROVIDER.—The term
‘nonphysician provider’ means an occupational ther-
apist, physical therapist, nurse, nurse midwife, nurse
practitioner, social worker, or optometrist.
‘‘(6) NURSE.—The term ‘nurse’ means a reg-
istered nurse, or an individual with a baccalaureate
or master’s degree in nursing.
‘‘(7) PHYSICIAN PROVIDER.—The term ‘physi-
cian provider’ means—
‘‘(A) a physician specializing in family
medicine, general internal medicine, pediatrics,
obstetrics and gynecology, general surgery, psy-
chiatry, preventive medicine, or physiatry; or
‘‘(B) a dentist.
‘‘(8) PROGRAM.—The term ‘Program’ means a
State Health Service Corps Scholarship Program es-
tablished under subsection (b).
‘‘(9) SERVICE AREA.—The term ‘service area’
means an area designated in section 338M(d)(2)(A).
‘‘(10) STATE OFFICIAL.—The term ‘State offi-
cial’ means an individual designated by the head of
the agency designated in subsection (b)(2) to carry
out the Program in the State.
‘‘(11) 
UNDERGRADUATE
EDUCATION.—The
term ‘undergraduate education’ means a course of
study at a health sciences university or a 4-year col-
lege that affords an appropriate basis for profes-
sional training or graduate education to become a
physician or nonphysician provider.
‘‘(b) ESTABLISHMENT.—
‘‘(1) IN GENERAL.—Each State carrying out a
State Health Services Corps Demonstration Project
established under section 338M shall establish a
State Health Service Corps Scholarship Program, in
accordance with this section, to ensure an adequate
supply of trained physician or nonphysician provid-
ers in health professional shortage areas in the
State.
‘‘(2) STATE AGENCY.—A State participating in
the Program shall designate a State agency to ad-
minister or be responsible for the administration of
the Program within the State.
‘‘(c) ELIGIBILITY.—To be eligible to participate in
the Program, an individual must—
‘‘(1)(A) be accepted for enrollment, or be en-
rolled, as a full-time student in a health professions
program in a health sciences university or a 4-year
college; or
‘‘(B) be accepted to participate in, or be partici-
pating in, a professional internship or residency as
preparation to become a physician or nonphysician
provider;
‘‘(2) reside within a health professional short-
age area;
‘‘(3) submit an application to participate in the
Program; and
‘‘(4) sign and submit to the State, at the time
of submission of the application, a written contract
containing the information specified in subsection
(g) to accept payment of a scholarship and, if appro-
priate, of loans, and to serve in the service area.
‘‘(d) SELECTION.—Individuals described in sub-
section (c)(1)(B)—
‘‘(1) shall comprise not more than 50 percent
of all individuals selected to participate in the Pro-
gram during fiscal year 1994;
‘‘(2) shall comprise not more than 40 percent
of all individuals selected to participate in the Pro-
gram during fiscal year 1995;
‘‘(3) shall comprise not more than 30 percent
of all individuals selected to participate in the Pro-
gram during fiscal year 1996;
‘‘(4) shall comprise not more than 20 percent
of all individuals selected to participate in the Pro-
gram during fiscal year 1997;
‘‘(5) shall comprise not more than 10 percent
of all individuals selected to participate in the Pro-
gram during fiscal year 1998; and
‘‘(6) shall not be selected to participate in the
Program during fiscal years 1999 through 2001.
‘‘(e) INFORMATION ON SERVICE OBLIGATION.—In
disseminating application forms and contract forms to in-
dividuals desiring to participate in the Program, the State
official shall include with the forms—
‘‘(1) a fair summary of the rights and liabilities
of an individual whose application is approved (and
whose contract is accepted) by the State official, in-
cluding in the summary a clear explanation of the
remedies to which the State is entitled in the case
of breach of the contract by the individual; and
‘‘(2) such information as may be necessary for
the individual to understand the prospective partici-
pation of the individual in the Program and the
service obligation of the individual.
‘‘(f) APPLICATION FORMS.—The application form,
contract form, and all other information furnished by the
Secretary under this section shall be written in a manner
calculated to be understood by the average individual ap-
plying to participate in the Program. The State official
shall make the application forms, contract forms, and
other information available to individuals desiring to par-
ticipate in the Program on a date sufficiently early to en-
sure that the individuals have adequate time to carefully
review and evaluate the forms and information.
‘‘(g) CONTRACT.—The written contract between the
State official and an individual shall contain—
‘‘(1) a statement that the State official
agrees—
‘‘(A) to provide the individual with a schol-
arship for a period of up to 8 years, during
which period the individual is—
‘‘(i) pursuing an undergraduate edu-
cation described in subsection (a)(11);
‘‘(ii) pursuing graduate education; or
‘‘(iii) participating in an internship or
residency program as preparation to be-
come a physician or nonphysician provider;
and
‘‘(B) to place the individual into obligated
service, taking into account the specialization of
the individual and the needs of health profes-
sional shortage areas for service, in—
‘‘(i) a rural health professional short-
age area, if the individual resided in a
rural health professional shortage area at
the time of acceptance into the Program;
or
‘‘(ii) an urban health professional
shortage area, if the individual resided in
an urban health professional shortage area
at the time of acceptance into the
Program;
‘‘(2) a statement that the individual agrees—
‘‘(A) to accept provision of the scholarship,
and if appropriate, loans, to the individual;
‘‘(B) to maintain enrollment in a program
of undergraduate or graduate education or par-
ticipation in an internship or residency de-
scribed in subsection (c)(1)(B) until the individ-
ual completes the program, internship, or resi-
dency;
‘‘(C) while enrolled in a program of under-
graduate or graduate education, to maintain an
acceptable level of academic standing (as deter-
mined under regulations of the State by the
educational institution offering the course of
study); and
‘‘(D) to serve in the service area or on the
clinical staff of the area health education center
or the medical school for a time period equal to
the shorter of—
‘‘(i)(I) 1 year for each year in which
the individual received a scholarship under
the Program; and
‘‘(II) 1 month for each $1,000 in
loans that the individual received under the
Program; or
‘‘(ii) 6 years;
‘‘(3) a statement of the damages to which the
State is entitled for breach of contract by the indi-
vidual; and
‘‘(4) other statements of the rights and liabil-
ities of the State and of the individual, not inconsist-
ent with this section.
‘‘(h) ACCEPTANCE.—
‘‘(1) APPROVAL.—An individual shall become a
participant in the Program only on approval by the
State official of the application submitted by the in-
dividual under subsection (c)(3) and acceptance of
the contract submitted by the individual under sub-
section (c)(4).
‘‘(2) NOTIFICATION.—The State official shall
provide written notice to an individual of participa-
tion in the Program promptly on acceptance of the
individual into the Program.
‘‘(i) SCHOLARSHIP AND LOANS.—
‘‘(1) PAYMENT.—In providing a loan to an indi-
vidual under subsection (g)(1)(A) or a scholarship to
an individual under subsection (g)(1)(B), the State
official shall pay—
‘‘(A) to an individual undertaking a pro-
gram of undergraduate or graduate education,
or on behalf of the individual in accordance
with paragraph (2)—
‘‘(i) the amount of the tuition of the
individual in the school year;
‘‘(ii) the amount of all other reason-
able educational expenses, including fees,
books, and laboratory expenses, incurred
by the individual in the school year; and
‘‘(iii) a stipend; and
‘‘(B) to an individual described in sub-
section (c)(1)(B)—
‘‘(i) the amount of expenses for medi-
cal equipment necessary to the practice of
a physician or nonphysician provider;
‘‘(ii) the amount of expenses for travel
to and from clinical sites; and
‘‘(iii) a stipend.
‘‘(2) PAYMENT TO AN EDUCATIONAL INSTITU-
TION.—The State official may contract with an edu-
cational institution, in which a participant in the
Program is enrolled, for the payment to the edu-
cational institution of the amounts of tuition and
other reasonable educational expenses described in
clauses (i) and (ii) of paragraph (1)(A).
‘‘(j) REPORT.—The State official shall report to the
Secretary on January 1 of each year—
‘‘(1) the number, and type of health profession
training, of students receiving scholarships under
the Program in the preceding year;
‘‘(2) the educational institutions at which the
students are receiving their training;
‘‘(3) the number of applications filed under this
section in the school year in the preceding year and
in prior school years; and
‘‘(4) the amount of tuition paid in the aggre-
gate and at each educational institution for the
school year in the preceding year and in prior school
years.’’.
TITLE IV—TREATMENT OF STU-
DENT LOANS FOR HEALTH
PROFESSIONALS
SEC. 401. LOANS UNDER HIGHER EDUCATION ACT OF 1965;
DEFERMENTS REGARDING POSTGRADUATE
PRIMARY-CARE 
PROGRAMS 
IN 
UNDER-
SERVED RURAL AREAS.
(a) STAFFORD LOANS.—
(1) GSL LOANS.—Section 428(b)(1)(M) of the
Higher 
Education 
Act 
of 
1965 
(20 
U.S.C.
1078(b)(1)(M)) is amended—
(A) in clause (ii), by striking ‘‘or’’ at the
end;
(B) in clause (iii), by adding ‘‘or’’ after the
semicolon at the end; and
(C) by adding at the end the following
clause:
‘‘(iv) during which the borrower is
serving in an internship or residency pro-
gram, in a health facility in a rural area,
in preparation for practice in an area of
primary care (including internal medicine,
pediatrics, 
obstetrics/gynecology, 
family
medicine, and osteopathy);’’.