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The Loan Repayment Program Contract

Home > About the Programs > Intramural LRPs > The Loan Repayment Program contract


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The Loan Repayment Program contract



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Breach of Contract

In accordance with 42 USC 254o, which addresses enforcement of the National Health Service Corps LRP contract (legislation establishing the NIH LRPs stipulates that certain provisions of the NHSC LRP are applicable to the NIH LRPs), any participant who fails to complete the minimum 2-year (or 3-year for General Research LRP) service obligation required under the terms of their initial contract will be considered to have breached such contract. If you have breached your NIH LRP contract you are not eligible to apply again to the program.

Contracts Starting Prior to October 1, 2003

The NIH is entitled to recover from participants who have breached their LRP contract the sum of:
    Amounts paid by the NIH to the participant or the participant's lender on their behalf for any period of obligated service not served. An “unserved obligation penalty” which is the number of months of obligated service not completed multiplied by $7,500, and Interest on the above amounts shall accrue from the date of the breach at the maximum prevailing rate determined by the United States Department of the Treasury.
The minimum participant liability following a breach of contract with penalty shall be $31,000. Any amount the NIH is entitled to recover shall be paid within the one-year period beginning on the date of the breach.

The following examples apply to each of the LRPs (intramural 42 USC 288-1 and 42 USC 288-3; extramural 42 USC 288-2, 42 USC 288-5, 42 USC 288-5a, and 42 USC 288-6):

Example 1: Dr. Jones' repayable debt was $123,000 at the beginning of her two-year LRP contract and her quarterly payment amount was set at $7,687.50. She decides to leave the program after 10½ months, during which time NIH had made three equal quarterly loan payments on her behalf. The NIH determines there is a breach of contract with an unserved obligation penalty. Dr. Jones is not liable for the $23,062.50 repayment benefit she received but is liable for a $105,000 penalty ($7,500 x 14 months), plus interest.

Example 2: Dr. Jones' repayable debt was $165,000 at the beginning of her two-year LRP contract and her quarterly payment amount was set at $8,750. She decides to leave the program after completing her 15th month of research service, during which time NIH had made five equal quarterly payments. The NIH determines there is a breach of contract with an unserved obligation penalty. Four of the payments went to her lenders and one was to Dr. Jones to partially reimburse payments she made to her lenders during her LRP contract. Dr. Jones is not liable for the $43,750 repayment benefit she received but is liable for a $67,500 penalty ($7,500 x 9 months), plus interest.

A participant's breach of contract liability to the NIH may be released by a discharge in bankruptcy under Title 11 of the United States Code only if such discharge is granted after the expiration of the 7-year period beginning on the first date that payment of such damages is required, and only if the bankruptcy court finds that nondischarge of the obligation would be unconscionable.

Cancellation, Suspension and Waiver of Obligation

  1. Any service or payment obligation incurred by the participant under this contract will be canceled upon the participant's death.
  2. The Secretary/NIMHD Director may waive or suspend the participant's service or payment obligation incurred under this contract if compliance by the participant with the Terms and Conditions of this contract is impossible or would involve extreme hardship, and enforcement of such obligation would be unconscionable. Any amounts pre-paid beyond the period of employment or affiliation must be repaid by the participant.

Damages Payable in One Year

Any amount that the United States is entitled to recover due to a breach of contract must be paid within one year from the date of the breach, unless the Secretary, DHHS, specifically authorizes a longer period.

Effects of Delinquency in Paying Damages

Collection agencies may be utilized when payment of damages in excess of $100 is delinquent by more than 60 days.

Discharge in Bankruptcy

Any obligation of the participant for payment of damages may be released by a discharge in bankruptcy under Title 11 of the United States Code only if such discharge is granted after expiration of the five-year period beginning on the first date that payment of such damages is required, and only if the bankruptcy court finds that non-discharge of the obligation would be unconscionable.

Waiver of Service Obligation or Penalties

A partial or total waiver of the service obligation, the payment obligation, or recovery of damages may be granted by the Secretary, DHHS, when compliance by the participant is impossible; would involve extreme hardship; or where enforcement with respect to the individual would be unconscionable.



Date Last Updated: December 20, 2010


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