Breach of agreement: liability

38 U.S.C. § 7675
in effect
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(a) Liquidated Damages.—A participant in the Program (other than a participant described in subsection (b)) who fails to accept payment, or instructs the educational institution in which the participant is enrolled not to accept payment, in whole or in part, of a scholarship under the agreement entered into under section 7603 of this title shall be liable to the United States for liquidated damages in the amount of $1,500. Such liability is in addition to any period of obligated service or other obligation or liability under the agreement. (b) Liability During Course of Education or Training.—(1) Except as provided in subsection (d), a participant in the Program shall be liable to the United States for the amount which has been paid to or on behalf of the participant under the agreement if any of the following occurs:(A) The participant fails to maintain an acceptable level of academic standing in the educational institution in which the participant is enrolled (as determined by the educational institution under regulations prescribed by the Secretary). (B) The participant is dismissed from such educational institution for disciplinary reasons. (C) The participant voluntarily terminates the course of education or training in such educational institution before the completion of such course of education or training. (D) The participant fails to become licensed to practice medicine, osteopathy, dentistry, podiatry, or optometry in a State, fails to become licensed as a registered nurse in a State, or fails to meet any applicable licensure requirement in the case of any other health-care personnel who provide either direct patient-care services or services incident to direct patient-care services, during a period of time determined under regulations prescribed by the Secretary. (E) The participant fails to maintain employment, while enrolled in the course of training being pursued by the participant, as a Department employee. (2) Liability under this subsection is in lieu of any service obligation arising under a participant’s agreement. (c) Liability During Period of Obligated Service.—(1) Except as provided in subsection (d), if a participant in the Program breaches the agreement by failing for any reason to complete such participant’s period of obligated service, the United States shall be entitled to recover from the participant an amount determined in accordance with the following formula: t−s A=3Φ ( —— ) t (2) In such formula:(A) “A” is the amount the United States is entitled to recover. (B) “Φ” is the sum of—(i) the amounts paid under this subchapter to or on behalf of the participant; and (ii) the interest on such amounts which would be payable if at the time the amounts were paid they were loans bearing interest at the maximum legal prevailing rate, as determined by the Treasurer of the United States. (C) “t” is the total number of months in the participant’s period of obligated service, including any additional period of obligated service in accordance with section 7673(c)(2) of this title. (D) “s” is the number of months of such period served by the participant in accordance with section 7673 of this title. (d) Limitation on Liability for Reductions-in-Force.—Liability shall not arise under subsection (b)(1)(E) or (c) in the case of a participant otherwise covered by the subsection concerned if the participant fails to maintain employment as a Department employee due to a staffing adjustment. (e) Period for Payment of Damages.—Any amount of damages which the United States is entitled to recover under this section shall be paid to the United States within the 1-year period beginning on the date of the breach of the agreement.

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