Student Loan Programs Authorized by the Public Health Service Act: An Overview

March 16, 2021 R46720

Student Loan Programs Authorized by the
March 16, 2021
Public Health Service Act: An Overview
Elayne J. Heisler
The Public Health Service Act authorizes several student loan programs that support
Specialist in Health
health workforce development. The Department of Health and Human Services (HHS),
Services
through the Health Resources and Services Administration (HRSA), administers five

active student loan programs:
Alexandra Hegji

Analyst in Social Policy
Health Professions Student Loans: available to individuals who are studying

dentistry, optometry, pharmacy, podiatric, or veterinary medicine.
 Loans for Disadvantaged Students: available to individuals from

disadvantaged backgrounds who are pursuing degrees in dentistry, optometry,
pharmacy, al opathic, osteopathic, or veterinary medicine.
 Primary Care Loans: available to individuals who are studying al opathic or osteopathic
medicine.
 Nursing Student Loans: available to individuals who are studying for an associate’s, bachelor’s,
or graduate degree in nursing.
 Nurse Faculty Loan Program: available to graduate-level nurses who are interested in
becoming nurse faculty. These loans are partial y cancel ed in exchange for serving as nurse
faculty.
The first four of these programs are operated as revolving loan funds, while the Nurse Faculty Loan Program,
which includes a loan cancel ation benefit, does not. As of July 31, 2019, approximately 81,800 of these loans,
together totaling approximately $900 mil ion, were outstanding.
Under these programs, institutions make loans directly to students using a combination of federal and institutional
funds. Student eligibility criteria and loan terms and conditions are general y prescribed in statute and regulations.
Although HRSA oversees the overal operation of the programs, institutions are responsible for the day-to-day
administration of the programs, including loan servicing and collection activities, which are guided by statutory
and regulatory requirements.
A sixth program—the Health Education Assistance Loan (HEAL) Program—previously made loans available to
eligible graduate students in schools of medicine, osteopathy, dentistry, veterinary medicine, optometry, podiatry,
public health, pharmacy, and chiropractic medicine, or in programs in health administration and clinical
psychology. Congress terminated the authority to make new HEAL Program loans after September 30, 1998, but
many program loans remain outstanding, and the federal government remains responsible for administering the
program. HHS original y administered the program, but the Consolidated Appropriations Act, 2014 (P.L. 113-76),
transferred administration of the program to the Department of Education. As of November 15, 2017, HEAL
program loans totaling approximately $187 mil ion, borrowed by 11,390 individuals, were outstanding.

Congressional Research Service

Student Loan Programs Authorized by the Public Health Service Act: An Overview

he Public Health Service Act (PHSA, 42 U.S.C. §§201 et. seq.) authorizes five student
loan programs administered by the Department of Health and Human Services (HHS)
T through the Health Resources and Services Administration (HRSA): (1) Health
Professions Student Loans, (2) Loans for Disadvantaged Students, (3) Primary Care Loans, (4)
Nursing Student Loans, and the (5) Nurse Faculty Loan Program. These programs aim to, among
other purposes, assist students who are from low-income backgrounds with the costs of attending
health professional schools, to diversify the health workforce, and to increase the number of
primary care physicians. As of July 31, 2019, approximately 81,800 HRSA loans, totaling $900
mil ion, were outstanding.1
Today, most federal student loans are made through the Wil iam D. Ford Direct Loan program,
which is authorized under Title IV of the Higher Education Act of 1965 (HEA; P.L. 89-329, as
amended) and administered by the Department of Education (ED).2 As of September 30, 2020,
approximately $1.3 tril ion in Direct Loan program loans, borrowed by or on behalf of 36 mil ion
individuals, were outstanding.3 Though HRSA’s programs are relatively smal in the larger
context of federal student loans, they offer targeted assistance to health professional trainees and
may provide incentives that differ from other loan programs (e.g., the ability to delay loan
repayment during required clinical training, such as internship and residency).
This report describes PHSA student loan programs, including borrower eligibility requirements,
loan terms and conditions, and administrative rules. It also briefly describes the Health Education
Assistance Loan (HEAL) program, a related student loan program authorized under the PHSA
that was previously administered by HRSA and is now administered by ED. The report concludes
with a table comparing these programs by borrower type, repayment terms, the number of
participating schools, and the number and financial amount of outstanding loans.
Loan Program Overview
PHSA Titles VII and VIII authorize six student loan programs to help health profession students
finance the cost of their education. Five of these programs—hereinafter referred to as active
PHSA student loan programs—currently make loans available to borrowers and are administered
by HHS’s HRSA. These programs provide loans to target-specific health professions and
general y require that participants come from low-income or disadvantaged backgrounds.4 The
active PHSA student loan programs are as follows:
 Health Professions Student Loans (HPSL): available to individuals who are
studying dentistry, optometry, pharmacy, podiatric, or veterinary medicine.

1 CRS Communication with U.S. Department of Health and Human Service, Health Resources and Serv ices
Administration staff, June 4, 2020, and July 14, 2020.
2 For additional information on the Direct Loan program, see CRS Report R45931, Federal Student Loans Made
Through the William D. Ford Federal Direct Loan Program : Term s and Conditions for Borrowers. In addition, two
other federal student loan programs are authorized under T itle IV of the HEA: the Federal Family Education Loan
program and the Perkins Loan program. Loans are no longer being made un der these programs, but borrowers remain
responsible for making payments on outstanding loans made under the programs. T he Direct Loan program makes up
the majority of ED’s student loan portfolio—approximately 83% in terms of dollars outstanding and recipients.
3 Department of Education, Federal Student Aid, Federal Student Aid Data Center, “Federal Student Aid Portfolio
Summary,” FY2020, Q4, https://studentaid.gov/sites/default/files/fsawg/datacenter/library/PortfolioSummary.xls.
4 For more information about school-based loan programs administered by the Department of Health and Human
Service (HHS), see HHS, Health Resources and Services Administr ation (HRSA), “ School-Based Loans and
Scholarships,” https://bhw.hrsa.gov/loans-scholarships/school-based-loans. For information about HRSA’s Nurse
Faculty Loan Program, see HRSA, “Nurse Faculty Loan Program (NFLP) Administrative Guidelines”
https://www.hrsa.gov/sites/default/files/hrsa/grants/faqs/NFLP-admin-guidelines-2017.pdf.
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Student Loan Programs Authorized by the Public Health Service Act: An Overview

 Loans for Disadvantaged Students (LDS): available to individuals from
disadvantaged backgrounds (as defined by the program) who are pursuing
degrees in dentistry, optometry, pharmacy, al opathic, osteopathic, or veterinary
medicine.
 Primary Care Loans (PCL): available to individuals who are studying
al opathic or osteopathic medicine.
 Nursing Student Loans (NSL): available to individuals who are studying for an
associate’s, bachelor’s, or graduate degree in nursing.
 Nurse Faculty Loan Program (NFLP): available to individuals who are post
baccalaureate nursing students and who are interested in becoming nurse faculty.
These loans are partial y cancel ed in exchange for serving as nurse faculty.
As of July 31, 2019, approximately 81,800 of these loans, totaling $900 mil ion, were
outstanding.5
The sixth program—the Health Education Assistance Loan (HEAL) Program—made loans
available to eligible graduate students in schools of medicine, osteopathy, dentistry, veterinary
medicine, optometry, podiatry, public health, pharmacy, and chiropractic, or in programs in health
administration and clinical psychology. Although Congress terminated the authority to make new
HEAL Program loans after September 30, 1998,6 many HEAL program loans remain outstanding,
and the federal government remains responsible for administering the program. HHS original y
administered the HEAL program, but the Consolidated Appropriations Act, 2014 (P.L. 113-76),
transferred administration of the program to ED. As of November 15, 2017, HEAL program loans
totaling approximately $187 mil ion, owed by 11,390 individuals, were outstanding.7
Active PHSA Loan Programs
As described above, there are five active PHSA Loan programs (i.e., those that currently make
loans available to students): the HPSL, LDS, PCL, and NSL programs, and the NFLP. School and
student eligibility requirements for al five programs share many attributes, so those requirements
are discussed together below. Loan terms and conditions for four of the programs—HPSL, LDS,
PCL, and NSL—are also similar. In addition, al four programs are operated as revolving loan
funds. Therefore those programs’ structures and loan terms and conditions are discussed
collectively below. NFLP terms and conditions are discussed separately, because the intent of the
program is to provide loan cancel ation benefits to borrowers following a borrower’s completion
of service requirements; thus its loan terms and conditions vary somewhat from the other four
programs. (The terms and conditions for this program appear in the “Nurse Faculty Loan Program
(NFLP) Loan Terms and Conditions” text box below.)
For each of the active PHSA loan programs, the PHSA authorizes the al ocation of federal funds
(known as a federal capital contribution, or FCC) to eligible institutions to help them capitalize
funds to make loans to students pursuing health profession education. For initial participation in
the programs, institutions were required to contribute a matching institutional capital contribution
(ICC) equal to at least one-ninth of the FCC. With the exception of the NFLP, which holds

5 CRS Communication with U.S. Department of Health and Human Service, Health Resources and Services
Administration staff, June 4, 2020, and July 14, 2020.
6 42 U.S.C. §292a(a).
7 U.S. Department of Education, “Health Education Assistance Loan (HEAL) Program,” 82 Federal Register 53377,
November 15, 2017.
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Student Loan Programs Authorized by the Public Health Service Act: An Overview

periodic competitions for grant funds, institutions participating in each of the active PHSA loan
programs provide new loans to students that are capitalized with funds repaid by students who
previously had borrowed loans made using FCC funds received in prior years and matching ICC
funds. Specifical y, in the HPSL, PCL, and NSL programs, FCCs were last awarded in FY1983
and some funds were real ocated in 1986 from schools that returned their FCCs to HHS. For the
LDS program, Congress repealed the authorization of appropriations for program funds effective
October 1, 2002, but schools with existing loan funds continue to make new loans to students
with amounts repaid from prior loans.8
Initial y, the FCCs had been al ocated using established regulatory criteria general y based on (1)
the amount requested by the institutions, (2) HRSA’s determination of the reasonableness of this
request, and (3) available funding. Today, institutions recapitalize their loan funds by depositing
the principal and interest repaid by borrowers, which enables institutions to make new loans to
new borrowers.
Institutions make loans directly to students. Student eligibility criteria and loan terms and
conditions are general y prescribed in statute and regulations. Although HRSA oversees the
overal operation of the programs, institutions (i.e., schools) are responsible for the day-to-day
administration of the programs, including loan servicing and collection activities, which are
guided by statutory and regulatory requirements. In addition, institutions must engage in other
required administrative activities, such as conducting entrance and exit interviews with
borrowers.9
Truth in Lending Act Requirements
Among other requirements, the Truth in Lending Act (TILA) requires that certain lenders of private education
loans disclose to borrowers a variety of information related to such loans at various points in the lending
relationship (e.g., contemporaneously with the consummation of a loan). In general, for pu rposes of TILA, a private
education loan is a loan not made under Higher Education Act of 1965 (HEA), Title IV; thus, TILA disclosure
requirements apply to schools that make loans under the various active PHSA loan programs and to HEAL
program lenders (discussed below). Among other items, a lender must disclose

the “amount financed” (i.e., the amount borrowed);

the “finance charge,” “annual percentage rate,” and “total of payments” and a brief description of each term;

the number, amounts, and timing of payments scheduled to repay the obligation;

information about penalty charges that may be imposed for late payment; and

a statement that the borrower should refer to the promissory note for information about nonpayment,
default, the right to accelerate the maturity of the obligation, and prepayment.
Sources: 15 U.S.C. §§1601-1651 and 12 C.F.R. §1026.18.
School Eligibility for Program Participation
In general, the school eligibility criteria for each of the PHSA student loan programs are similar;
however, criteria that advance program-specific goals differ from program to program. Although
no new funding is being awarded to establish PHSA loan programs, participating schools must
stil meet program criteria.

8 P.L. 105-392, §132.
9 During these interviews, schools must provide borrowers with information about their rights and responsibilities with
respect to the loans, such as information on repayment plans, loan deferments, and the consequences of default. See, for
example, 42 C.F.R. §57.210(b)(1).
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link to page 13 Student Loan Programs Authorized by the Public Health Service Act: An Overview

For al active the PHSA loan programs,10 eligible schools are public or private nonprofit
institutions located in a state.11 Foreign institutions are not eligible for PHSA student loan
programs. Eligible schools must offer the relevant degree for the loan program in which they seek
to participate (e.g., it must be an al opathic or osteopathic medical school to participate in the
PCL program). Schools must be accredited by the relevant accrediting organizations for the
discipline for which they are offering a degree in (e.g., al opathic medical schools must be
accredited by the Liaison Committee on Medical Education).12
In addition, schools must enter into a written agreement with the HHS Secretary in which the
institution agrees to a variety of program conditions, including that the institution wil establish
and maintain a student loan fund, that the fund wil be used only to make student loans to eligible
borrowers or for the administrative costs associated with collections, that the institution wil
inform borrowers of the loan terms and conditions, and that the institution wil submit an annual
operating report that describes the fund’s uses.
Each active PHSA loan program requires that a participating school’s default rate for the program
may not exceed 5%. The formula to calculate the default rate is shown in the text bow below.13
(For additional information, see “Default” section.)
School Default Rate
Defaulted principal amount outstanding
divided by
Matured loans
Notes: Defaulted principal amount outstanding means the total amount ever borrowed from a
school’s loan fund that has entered repayment (but excluding any principal amount that has been
repaid or cancel ed) and that has been in a default (i.e., a borrower has failed to make a payment
when due or otherwise failed to comply with the terms for the loans promissory note) for at least
120 days. Matured loans means the total principal amount of loans ever made by a school,
excluding the total principal amount of loans made by a school to students are who enrol ed in a
ful -time course of study at the school or who are in their grace period.
In general, schools that exceed the 5% threshold must reduce their default rate by 50% by the
close of the following six-month period.14 After the six-month period, schools that stil exceed the
5% threshold must reduce the default rate by 50% for each six-month period that it exceeds 5%
until the rate reaches 5%. General y, schools that fail to meet these standards may not receive new
program funding. However, in recent years this has not served as much of a sanction because,
with the exception of the NFLP, PHSA loan programs are not awarding new funding to schools.
Schools that do not meet the default rate standards are prohibited from making new loans and are

10 Specific statutory sections are PHSA Section 799 (42 U.S.C. §295o -1), which sets criteria for eligible institutions;
Section 721 (42 U.S.C. §292q), which lays out provisions for the loan fund agreements and the conditions that schools
must agree when administering the fund; and Section 835 (42 U.S.C. §297a), which specifies criteria for the Nursing
Student Loan program.
11 T he term state includes District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the
Northern Mariana Islands, the Virgin Islands, Guam, American Samoa, and the Republic of Palau, the Republic of the
Marshall Islands, and the Federated States of Micronesia. 42 C.F.R. §§57.202 and 57.302.
12 For additional information on accreditation, see CRS Report R43826, An Overview of Accreditation of Higher
Education in the United States.
13 HHS, HRSA, “Application to Participate in the Health Professions Student Loans (HPSL) Program”
https://bhw.hrsa.gov/sites/default/files/bureau-health-workforce/funding/hpsl-application.pdf, p. 6.
14 Schools with a default rate above 5%, but below 10%, must reduce the default rate to the 5% threshold within six
months.
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Student Loan Programs Authorized by the Public Health Service Act: An Overview

required to maintain existing funds, and any funds received, in an interest-bearing account.
Schools that do not meet the default rate standards may be subject to termination from the
program, which would terminate their ability to make new loans and would require them to return
FCC funds to the federal government.15
Schools that administer PCL and LDS funds must meet additional criteria beyond general
program eligibility. To be eligible for PCL program funds, schools must meet one of several
specified criteria demonstrating that the school has a record of students practicing primary care.16
Schools that do not comply with these criteria are subject to penalties requiring them to return a
portion of their PCL fund incomes. Schools participating in the LDS program must meet specified
criteria demonstrating a record of recruiting and retaining disadvantaged students and minority
faculty, providing instruction on minority health issues, having arrangements with clinics that
serve individuals from disadvantaged backgrounds, having linkages with specified minority-
serving institutions, and offering mentoring programs to help individuals from disadvantaged
backgrounds obtain health professions degrees.17 Schools that fail to meet these criteria may or
may not face consequences affecting their program participation.
Student Eligibility for Receiving Loans
To be eligible for any of the active PHSA student loan programs, borrowers must be U.S. citizens,
nationals, or lawful permanent residents. In general, students must be accepted to or enrol ed full-
time in an eligible institution (e.g., public or nonprofit institution) and in an eligible health
profession educational program, as determined by the specific loan program (e.g., a nursing
student for the NSL program). Only the NSL program loans are available to students enrolled on
a half-time basis. PHSA student loan program funds are primarily intended to support students
pursuing professional degrees. Therefore, PHSA funds are general y available only to students
who have already obtained a bachelor’s degree. However, there are some exceptions to this: (1)
HPSL and LDS program loans may be used to support borrowers pursuing a bachelor’s of
pharmacy degree and (2) NSL program loans may be used to obtain an associate’s or bachelor’s
degree in nursing. Al PHSA loan programs require students to be in good academic standing to
remain eligible for student loan funds.
With the exception of the NFLP, active PHSA student loan programs require that students
demonstrate having financial need to be eligible for funds. Financial need is determined by taking
into account the financial resources available to a student and the student’s cost of attendance—
the costs reasonably necessary for the student to attend the school, including tuition and
reasonable living costs.18 When determining the financial resources available to a student, a
school must use, in combination with other available information about the student’s financial
status, the expected family contribution (EFC) calculated according to need analysis formulas

15 42 C.F.R. §57.216a.
16 For example, HHS, HRSA, “Application to Participate in the Primary Care Loan (PCL) Program,”
https://bhw.hrsa.gov/sites/default/files/bureau-health-workforce/funding/pcl-application.pdf, p. 4-5.
17 For example, HHS, HRSA, “Application Loans for Disadvantaged Students (LDS) Program, Academic Year”
https://bhw.hrsa.gov/sites/default/files/bureau-health-workforce/funding/lds-application.pdf, pp. 10-11.
18 In general, institutions participating in the programs have discretion in setting their costs of attendance. HRSA has
indicated that using the HEA T itle IV requirements for developing costs of attendance “is an appropriate approach.”
See, for example, HHS, HRSA, “ST UDENT FINANCIAL AID GUIDELINES, HEALT H PROFESSIONS
PROGRAMS, Health Professions Student Loan Program (HPSL) ,” December 2011, https://bhw.hrsa.gov/sites/default/
files/bureau-health-workforce/funding/hpsl-financial-aid-guidelines.pdf, p. 15.
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Student Loan Programs Authorized by the Public Health Service Act: An Overview

specified under Title IV-F of the HEA.19 In general, schools must collect and assess parents’
financial information even if a student is considered independent for financial aid purposes under
the HEA.20 Students who do not provide parents’ financial information are ineligible for PHSA
loan programs. Under the PCL program, however, schools are permitted, but not obligated, to
require that independent students21 provide parental financial information.22
With the exception of the NFLP, students are required to register for selective service (if
applicable) to be eligible for loans under the PHSA loan programs.23 Although the programs do
not prohibit schools from making loans to students who have defaulted on other federal student
loans (e.g., those made under the HEA), HRSA suggests that schools establish such a policy to
more thoroughly vet students in default before awarding PHSA student loan funds.24
In general, individuals may borrow loan amounts for up to the cost of attendance for each year of
attendance at an eligible school. There are no aggregate loan limits for loans made through the
Title VII PHSA programs (PCL, LDS, and HPSL). Loan amounts may be made for up to the cost
of attendance; however, for the third and fourth years of medical school, under the LDS and PCL
programs, loan amounts may exceed the cost of attendance. These extra amounts must be used to
pay down previously borrowed student loans that were used to finance health professional
education under programs other than the PCL, LDS, and HPSL programs.25 This al owance
effectively enables students to refinance a portion of their outstanding student loan debt. Loans
made under the Title VIII nursing programs are subject to annual and aggregate limits. Students
may not borrow more than $3,300 per year in initial periods of study under the NSL program,
although students may borrow up to $5,200 per year in the last two years of study. Individuals
participating in the NSL program may not borrow an aggregate amount that exceeds $17,000.26
For NFLP, HRSA sets an annual loan limit of $35,500 per student for any academic year but does
not specify an aggregate limit.27 Statute specifies that NFLP annual loan amounts may be adjusted
to reflect the cost of pursuing an advanced nursing education.28

19 For additional information on the need analysis formula, see CRS Report R44503, Federal Student Aid: Need
Analysis Form ulas and Expected Fam ily Contribution. T he FAFSA Simplification Act (Division FF, T itle VII of the
Consolidated Appropriations Act, 2021 [P.L. 116-59]) amended HEA T itle IV-F by creating a student aid index to
replace the expected family contribution. T he act made additional changes to the need analysis formulas specified in
the HEA. In general, changes made by the FAFSA Simplification Act will not go into effect until July 1 , 2023.
20 Under the HEA, independent students include (but are not limited to) students who are 24 years of age or older by
December 31 of the award year and graduate and professional students. HEA §480(d) (20 U.S.C. §1087vv(d)).
21 For the PCL program, an independent student is a student who is at least 24 years of age and can prove that he or she
has been independent for a minimum of 3 years.
22 HHS, HRSA, “ST UDENT FINANCIAL AID GUIDELINES, HEALT H PROFESSIONS PROGRAMS, Primary
Care Loans,” December 2011, https://bhw.hrsa.gov/sites/default/files/bureau-health-workforce/funding/PCL-student-
financial-aid-guidelines.pdf, p. 35.
23 For information on the Selective Service, see CRS Report R44452, The Selective Service System and Draft
Registration: Issues for Congress.
24 See, for example, HHS, HRSA, “ST UDENT FINANCIAL AID GUIDELINES, HEALT H PROFESSIONS
PROGRAMS, Primary Care Loans,” December 2011, https://bhw.hrsa.gov/sites/default/files/bureau-health-workforce/
funding/PCL-student -financial-aid-guidelines.pdf, p. 37.
25 It does not appear that there are other restrictions on the type of previously borrowed student loan debt that may be
paid down with LDS and PCL program loans.
26 42 U.S.C. §297b.
27 HHS, HRSA, “Nurse Faculty Loan Program (NFLP): HRSA-20-004,” https://grants.hrsa.gov/2010/Web2External/
Interface/Common/EHBDisplayAttachment.aspx?dm_rtc=16&dm_attid=b631c79e-c7a8-4a3b-b28c-4b1587f5126c.
28 42 U.S.C. §297n-1(c)(2).
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HPSL, LDS, PCL, and NSL Loan Terms and Conditions
As discussed below, the loan terms and conditions for the HPSL, LDS, PCL, and NSL are similar.
(The NFLP is discussed separately in the text box below because that program’s loan terms and
conditions vary from the other four programs, given the NFLP’s intent to provide loan
cancel ation benefits to borrowers in exchange for serving as nurse faculty at an accredited
nursing school.) Unless otherwise specified, the information in this section applies to each active
PHSA loan program except the NFLP.
Nurse Faculty Loan Program (NFLP) Loan Terms and Conditions
HRSA’s NFLP provides competitive discretionary grant awards to nursing schools to operate a loan fund. Unlike
the other PHSA school-based loan programs, which have a revolving fund where new loans are made from repaid
loans, the NFLP works by cancel ing up to 85% of outstanding loans in exchange for borrowers’ four-year service
as nurse faculty members at accredited nursing schools. Because repaid loan amounts may be insufficient to make
new loan awards from an institution’s loan fund, additional funding is required for the institutional loan fund to
remain operational. The NFLP was created because experts had identified nurse faculty shortages as a key factor
limiting the rate at which new nurses could be recruited to avert a predicted nursing shortage.
The awarding of grants has not been consistent over the years; grants have been awarded in some years but not in
others. Most recently, in FY2020, one-year awards were made to approximately 81 schools, some of which were
to continue existing programs. To receive funds (either new or continuing), schools must provide HRSA with
information on how they intend to use the funds, including their plans to use al funds within 18 months.
NFLP loans are available to advanced nursing students (i.e., doctoral level, master’s level, or combined bachelor’s
and master’s program students) who agree to serve as nursing faculty. In exchange for a recipient’s service as a
nurse faculty member, the awarding school cancels up to 85% of the principal and interest of an NFLP loan over a
four-year period, with 20% cancel ed during each of the first, second, and third years of service. After the
borrower completes a fourth year of service, the school cancels 25% of the principal of and interest on the NFLP
loan. Any portion of the loan not cancel ed (i.e., the remaining 15%) must be repaid beginning after the four-year
service period has ended. In general, NFLP loans have an annual interest rate of 3%, which begins accruing three
months after a borrower ceases pursuing a course of study at a school of nursing. A 9-month grace period begins
immediately after a borrower ceases to pursue a course of study at a nursing school. During this grace period, a
borrower is not required to make loan payments, but interest accrues during the final six months). In addition, a
borrower is al owed an additional three-month grace period (beyond the initial nine-month grace period) to
obtain employment fol owing graduation. For borrowers who fail to complete their program of study, do not
obtain employment as nurse faculty within 12 months of graduation, or do not serve the ful four-year period, the
interest rate on NFLP loans changes from 3% to the prevailing market rate, which is adjusted annual y. The
prevailing market rate is determined by the Treasury Department after considering private consumer rates of
interest and is published quarterly in the Federal Register. For example, for January-March 2021, the prevailing
interest rate is 9 5/8%.
NFLP loans are repayable in equal or graduated instal ments, in accordance with the agreement made between the
borrower and the school. The repayment period for an NFLP loan is 10 years. This term applies to borrowers
who have completed their service commitment and are repaying their remaining loan balance. Borrowers may
prepay al or part of the loan. Loans may be deferred for up to three years while a borrower is performing active
duty service as a member of the uniformed service or serving as a Peace Corps volunteer. Loans may be deferred
for up to 10 years while a borrower is pursuing a graduate nursing degree on at least a half-time basis or is
otherwise pursuing advanced professional training in nursing (e.g., a post-doctoral fel owship). In addition, an
institution may place a borrower’s loan in forbearance when “extraordinary circumstances affect loan repayment.”
Neither statute, regulations, nor guidance specify consequences of default for individual borrowers, nor when
default is considered to have occurred for such purposes.
As with the other PHSA loan programs, an NFLP loan may be cancel ed if the borrower dies or becomes total y
and permanently disabled. Final y, eligible borrowers may consolidate their NFLP loans into a Direct Loan program
Consolidation Loan.
Sources: HHS, HRSA, “Nurse Faculty Loan Program (NFLP): HRSA-20-004,” https://www.hrsa.gov/grants/find-
funding/hrsa-20-004; HHS, HRSA, “Nurse Faculty Loan Program (NFLP) Administrative Guidelines,” September 6,
2017, https://www.hrsa.gov/sites/default/files/hrsa/grants/faqs/NFLP-admin-guidelines-2017.pdf; and HHS, “Interest
Rates on Overdue and Delinquent Debts,” https://www.hhs.gov/about/agencies/asfr/finance/financial-policy-library/
interest-rates/index.html, accessed March 2, 2021.
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Interest Rate
PHSA loans general y incur an interest rate of 5% if they were borrowed after November 4,
1988.29 Under the PCL program, borrowers must practice primary care for a minimum of 10 years
or until the loan is repaid, whichever comes first.30 Failure to meet the primary care service
requirement results in an increased interest rate, depending on when the loan was borrowed. For
loans made prior to November 13, 1998, the interest rate increases to 12%.31 For loans made on
or after November 13, 1998, and before March 23, 2010, the interest rate increases to 18%. For
loans made after March 23, 2010, the interest rate increases by 2 percentage points (i.e., to 7%).32
Interest does not begin to accrue on PHSA loans until the expiration of the grace period.
Grace Period
The grace period, during which repayment of principal is not required and interest does not
accrue, is one year for HPSL, LDS, PCL program loans, and nine months for NSL program loans.
The grace period begins immediately after a borrower first ceases to be enrolled on a full-time
basis in a health professions program, or ceases to be enrolled on at least a half-time basis for
NSL.33 The grace period cannot be postponed to follow any deferments (e.g., a deferment for
clinical training). As such, the grace period encompasses the first year of residency/advanced
clinical training or the first nine months of advanced clinical training for nurses.
Repayment
Borrowers are required to make payments on their loans during a repayment period that begins
immediately after the grace period or after any permissible deferments. Payments must be made
no less often than quarterly and may be made in equal or graduated instal ments in accordance
with a repayment schedule34 made between the borrower and the school. Borrowers who are more
than 60 days late with a payment must be placed on a monthly repayment schedule.
Monthly instal ments must be at least $40 per month, and a school may not agree to a payment
schedule that does not require at least a quarterly payment of principal and accrued interest. In

29 Different interest rates apply to PHSA loans made prior to November 5, 1988, depending on the date of
disbursement.
30 Individuals who received a loan prior to March 23, 2010, must practice primary care until the loan is repaid. T hese
changes are described in CRS Report R41278, Public Health, Workforce, Quality, and Rela ted Provisions in ACA:
Sum m ary and Tim eline.
31 Schools were also required to recalculate the balance due on the loan from the date of disbursement at an interest rate
of 12% and compounded annually, for which borrowers would be responsible for repaying. HHS, HRSA, “Student
Financial Aid Guidelines, Health Professions Programs, Primary Care Loan Program,” December 2011,
https://bhw.hrsa.gov/sites/default/files/bureau-health-workforce/funding/PCL-student -financial-aid-guidelines.pdf.
32 42 U.S.C. §297s(a)(3). T he Servicemembers Civil Relief Act caps the maximum interest charged on any debt
incurred by a member of the armed forces and the commissioned corps of the National Oceanic Atmospheric
Administration and the Public Health Service prior to entering active duty service at no higher than 6% per year for the
duration of their active duty service, if their ability to pay is materially affected by active -duty status. T he cap is not
automatic and must be requested by the servicemember. For additional information, see CRS Report R45283, The
Servicem em bers Civil Relief Act (SCRA): Section -by-Section Sum mary.
33 HHS, HRSA, “Student Financial Aid Guidelines, Health Professions Programs,” “Nursing Student Loan Program,”
June 2017, https://bhw.hrsa.gov/sites/default/files/bureau-health-workforce/funding/nsl-financial-aid-guidelines.pdf, p.
24.
34 A repayment schedule is the schedule by which borrowers are required to make loan payments. It includes a due date
for each payment, t he amount credited to principal and interest from each payment, and any minimum payment
amounts that may be required.
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general, repayment periods must be not less than 10 years, but not more than 25 years.35 The
repayment period for the NSL program is 10 years.36 With the exception of the NSL program,
schools are instructed to determine the appropriate repayment period based on a borrower’s loan
amounts and projected income. However, schools must attempt to maximize the amount of funds
available for revolving student loan funds while attempting to provide borrowers with flexibility
to repay their loans.37
A borrower may, at his or her option and without penalty, prepay al or any part of the principal
and accrued interest at any time. The prepayment must first be applied to accrued interest and
penalties, if any, and then to the principal balance.
Borrowers who are having difficulty making payments may receive a loan deferment or
forbearance. A deferment is a temporary period during which a borrower’s obligation to make
regular payments of principal and interest is suspended. During deferment periods, interest does
not accrue. For each loan type, deferment may be granted in the following circumstances:
 up to three years for active duty in the uniformed services;38
 up to three years for service as a Peace Corps volunteer;39
 while pursuing advanced professional training (e.g., residency or fel owship);40
 up to two years for a leave of absence from a school to pursue related educational
activity;41 and
 up to two years for training fel owships, training programs, and related
educational activities for graduates of a health professional school.
For the NSL program, loans may be deferred for up to 10 years during the time in which a
borrower is enrolled on at least a half-time basis in a collegiate nursing program leading to a
baccalaureate degree in nursing or a graduate degree in nursing or training to become a nurse
anesthetist. NSL program loans may be used to pursue associate’s, bachelor’s, and master’s level
nursing training. As such, this deferment permits individuals who received support for a prior
degree to receive additional support to advance in the nursing career ladder, provided that such
deferments do not exceed 10 years.

35 Deferment periods are excluded from the 25-year limit.
36 HHS, HRSA, “Student Financial Aid Guidelines, Health Professions Programs,” “Nursing Student Loan Program,”
June 2017, https://bhw.hrsa.gov/sites/default/files/bureau-health-workforce/funding/nsl-financial-aid-guidelines.pdf, p.
31.
37 See HHS, HRSA, “Student Financial Aid Guidelines, Health Professions Programs, Primary Care Loan Program
(PCL),” December 2011, https://bhw.hrsa.gov/sites/default/files/bureau-health-workforce/funding/PCL-student-
financial-aid-guidelines.pdf, p. 72.
38 Uniformed services includes active duty service in the Army, Navy, Air Force, Marine Corps, Coast Guard, National
Oceanic Atmospheric Administration, and the Public Health Service. See, for example, 42 C.F.R. § 57.210(a)(2).
39 Service in Volunteers in Service to America (VIST A) volunteer does not qualify for deferment.
40 Clinical training at a foreign institution may qualify a borrower for deferment, although foreign institutions
themselves are not eligible to participate in these programs. Foreign clinical training would qualify an individual for a
deferment if such training counts for purposes of licensure or board certification where applicable. Schools are
permitted to determine if such training is eligible for forbearance.
41 T his educational activity must be through a joint -degree program that is related to the original degree for which the
borrower is receiving support. While the educational program may exceed two years, PHSA loans may only be
deferred for two years for a related degree.
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PHSA student loans may be placed in forbearance, during which a borrower’s obligation to make
payments on a loan’s principal is temporarily suspended but interest continues to accrue.42 During
forbearance, a borrower must make a minimum payment on the interest that continues to accrue.
An institution may grant a borrower forbearance when extraordinary circumstances exist.43
Examples of extraordinary circumstances include unemployment, poor health, or other short-term
personal problems that temporarily curtail a borrower’s ability to make scheduled payments.
HRSA guidance urges schools to minimize the use of forbearance to lessen the potential burden
for borrowers because of a reduced payment schedule.44 Borrowers must request forbearance, and
institutions have discretion in whether to grant it. HRSA requires that institutions annual y obtain
documentation that supports a borrower’s request for forbearance.
In addition, HRSA permits institutions to renegotiate a borrower’s repayment schedule when the
borrower is able to make regular payments but is unable to pay the amount needed to keep the
account current. The institution and borrower must agree on a new repayment schedule; however,
the new schedule does not supersede the requirement to repay the loan within the established
program time periods (e.g., 25 years for PCL and 10 years for NSL).45
Final y, with the exception of PCLs,46 eligible borrowers may consolidate their PHSA program
loans into a Direct Loan program Consolidation Loan.47 Consolidation al ows borrowers to
refinance their loan by borrowing a new loan and using the proceeds to pay off their existing
student loan obligations. After consolidation, terms and conditions of Direct Consolidation Loans
apply; PHSA program loan terms and conditions no longer apply.
Default
A borrower is considered to be in default on his or her PHSA loan if he or she fails to make a
payment when due48 or otherwise fails to comply with the terms of the loan’s promissory note.49
Institutions must assess borrowers a late fee for payments that are more than 60 days late. For

42 See, for example, HHS, HRSA, “Student Financial Aid Guidelines, Health Professions Programs, Primary Care L oan
Program (PCL),” December 2011, https://bhw.hrsa.gov/sites/default/files/bureau-health-workforce/funding/PCL-
student-financial-aid-guidelines.pdf, p. 76.
43 See, for example, 42 C.F.R. §57.210.
44 See, for example, HHS, HRSA, “Student Financial Aid Guidelines, Health Professions Programs, Primary Care
Loans,” December 2011, https://bhw.hrsa.gov/sites/default/files/bhw/pcl.pdf https://bhw.hrsa.gov/sites/default/files/
bureau-health-workforce/funding/PCL-student-financial-aid-guidelines.pdf, p. 76.
45 HRSA permits HPSL and LDS loans to be repaid over 25 years, but guidance regarding negotiation refers to a 10 -
year repayment schedule for both programs. As such, it is unclear how the longer length operates with regard to loan
terms that have been renegotiated. See HHS, HRSA, “Student Financial Aid Guidelines Health Professions Program:
Health Professions Student Loan Program, (HPSL)” December 2011, https://bhw.hrsa.gov/sites/default/files/bureau-
health-workforce/funding/hpsl-financial-aid-guidelines.pdf, p. 38 and, HHS, HRSA, “ Student Financial Aid
Guidelines, Health Professions Programs, Loans for Disadvantaged Students Program (LDS),” December, 2011,
https://bhw.hrsa.gov/sites/default/files/bureau-health-workforce/funding/lds-financial-aid-guidelines.pdf, pp. 44.
46 PCLs are ineligible for consolidation into a Direct Consolidation Loan because of the requirements that PCL
borrowers work for 10 years in primary care.
47 20 U.S.C. §1078-3(a)(4). Borrowers must meet additional criteria to consolidate their PHSA loans into a Direct
Consolidation Loan, including having at least one loan borrowed through the Direct Loan program or the Federal
Family Education Loan program.
48 T his is unlike the rules applicable to loans made under the HEA T itle IV Direct Loan program, where a borrower is
generally considered in default on a loan when he or she fails to make required payments or otherwise fails to comply
with the terms of loans promissory note for 270 days. 34 C.F.R. §685.102(b).
49 42 C.F.R. §§57.202 and 57.302. A promissory note is a contract between a lender and a borrower that contains the
terms and conditions of the loan.
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loans disbursed or promissory notes signed on or after October 22, 1985, the late fee may not
exceed 6% of the instal ment payment. Schools must notify appropriate consumer reporting
agencies regarding borrowers whose accounts are at least 120 days overdue.50
Schools have several options in handling borrower default, including accelerating the loan
payment, wherein the entire unpaid balance of the loan becomes due in full, and referring
defaulted loans to a collection agency and instituting legal proceedings against a borrower.51 In
addition, schools may refer loans to the Secretary for collection assistance, which could include
the offset of federal employee salaries, if applicable, and subsequent referral to the Attorney
General for appropriate civil action.52
With the exception of PCLs, a borrower may consolidate his or her defaulted PHSA loan into a
Direct Consolidation Loan under ED’s Direct Loan program by using the proceeds of a new
Direct Consolidation to pay off the defaulted loan. This would effectively cure the default on the
PHSA loan, as the loan would be considered paid in full. To be eligible to do so, a borrower must
make satisfactory repayment arrangements with the loan holder53 or agree to repay the Direct
Consolidation Loan under one the income-driven repayment plans available under the Direct
Loan program.54
Loan Cancellation
PHSA loans may be cancel ed (sometimes referred to as loan discharge) if the borrower dies or
becomes permanently and total y disabled.55 Schools are permitted to charge borrowers an
insurance premium to cover the loss of institutional funds resulting from such cancel ation.56 In
addition, PHSA loans may be discharged in bankruptcy under limited circumstances.57
Program Data
Schools that participate in the active loan programs are required to provide HRSA with annual
data on their programs. The most current data available are as of July 1, 2019. Table 1 provides
data on the five active loan programs. Data are sorted by program; however, it is possible for a

50 42 C.F.R. §§57.210(b)(1)(x) and 57.310(b)(1)(x).
51 Institutions are required to use all of these practices to some extent; however, they often have discretion in
determining when and how to use these practices. 42 C.F.R. §§57.210(b) & 57.310(b). See also HHS, HRSA, “ Student
Financial Aid Guidelines, Fiscal Management , Accounting Procedures,” https://bhw.hrsa.gov/sites/default/files/bureau-
health-workforce/funding/fiscal-management -accounting.pdf, pp. 19-26.
52 42 U.S.C. §§292r(l) and 297b(j).
53 Regulations do not define “satisfactory repayment arrangements.”
54 34 C.F.R. § 685.220(i)(3)(ii) and U.S. Department of Education, “Direct Consolidation Loan Application an d
Promissory Note: William D. Ford Federal Direct Loan Program,” OMB No. 1845 -0053. For additional information on
the income-driven repayment plans, see CRS Report R45931, Federal Student Loans Made Through the William D.
Ford Federal Direct Loan Program : Term s and Conditions for Borrowers.
55 A borrower is considered permanently and totally disabled if he or she is “unable to engage in any substantial gainful
activity because of a medically determinable impairment, which the Secretary expects to continue for a long time or to
result in death.” HHS, HRSA; see, for example, 42 C.F.R. §57.211(a).
56 T he insurance premium may not exceed 0.6% of the loan amount disbursed. See, for example, HHS, HRSA,
“ST UDENT FINANCIAL AID GUIDELINES, HEALT H PROFESSIONS PROGRAMS, Primary Care Loan Program
(PCL),” December 2011, https://bhw.hrsa.gov/sites/default/files/bureau-health-workforce/funding/PCL-student -
financial-aid-guidelines.pdf, p. 61.
57 Section 523(a)(8) of the Bankruptcy Code (11 U.S.C. § 523(a)(5)), provides that student loans are presumptively not
dischargeable in bankruptcy absent an undue hardship. For additional information, see CRS Report R45113,
Bankruptcy and Student Loans, Bankruptcy and Student Loans.
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borrower to receive loans for more than one PHSA program. Available data do not track
individual borrowers for confidentiality reasons. As such, it is not possible to determine unique
borrower counts in each of the programs.

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link to page 18
Table 1. Active PHSA Loan Program Data
(Data as of July 2019)
Statutory Citation
Number of
Total Outstanding
Average
and Program
Repayment
Schools
Number of
Loan Balance
Outstanding Loan
Website
Borrower Type
Terms
Participating
Outstanding Loans
($ in thousands)
Balance
Health Professions Student Loans
42 U.S.C. §§292q-r
Low-income student 
Repayment schedule of
112
30,050
$387,888
$12,908
(https://bhw.hrsa.gov/ enrol ed in accredited
not less than 10 years, but
sites/default/files/
schools of dentistry,
not more than 25 years
bureau-health-
optometry,

5% interest rate
workforce/funding/
pharmacy, podiatric,
hpsl-financial-aid-
or veterinary

Deferment for
guidelines.pdf)
medicine
postgraduate training
needed for licensure (e.g.,
residency)

Renegotiation and
forbearance permitted

Eligible for consolidation
into Direct Loan program
Primary Care Loans
42 U.S.C. §292s
Low-income students 
Repayment schedule of
98
2,119
$149,540
$70,571
(https://bhw.hrsa.gov/ enrol ed in accredited
not less than 10 years and
sites/default/files/
schools of
not more than 25 years
bureau-health-
osteopathic or

workforce/funding/
al opathic medicine

Deferment for
postgraduate training
PCL-student-
needed for licensure (e.g.,
financial-aid-
residency)
guidelines.pdf)

Must complete a
residency in primary care
and practice for 10 years
(for borrowers after
March 23, 2010) or until
the loan is repaida

Interest rate of 5%, but
increases for borrowers
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link to page 18
Statutory Citation
Number of
Total Outstanding
Average
and Program
Repayment
Schools
Number of
Loan Balance
Outstanding Loan
Website
Borrower Type
Terms
Participating
Outstanding Loans
($ in thousands)
Balance
who fail to meet the
primary care service
requirement. For
borrowers after March
23, 2010, rate increases
2% above prior rate

Renegotiation and
forbearance are
permitted

Ineligible for consolidation
into Direct Loan program
Loans for Disadvantaged Students
42 U.S.C. §292t
Students from

Repayment schedule of
105
7,058
$151,889
$21,520
(https://bhw.hrsa.gov/ disadvantaged
not less than 10 years and
sites/default/files/
backgrounds enrol ed
not more than 25 years
bureau-health-
in accredited schools 
workforce/funding/
of dentistry,

5% interest rate
lds-financial-aid-
pharmacy, al opathic, 
Deferment for
guidelines.pdf)
osteopathic, or
postgraduate training
veterinary medicineb
needed for licensure (e.g.,
residency)

Renegotiation and
forbearance permitted

Eligible for consolidation
into Direct Loan program
Nursing Student Loans
42 U.S.C. §§297a-i
Low-income

Repayment schedule of 10
243
40,295
$143,301
$3,556
(https://bhw.hrsa.gov/ borrowers enrol ed
years
sites/default/files/
in nursing schools in  Interest rate of 5%
bureau-health-
preparation for an
workforce/funding/
associate’s,

Deferment while pursuing
nsl-financial-aid-
bachelor’s, or
for advanced nursing
guidelines.pdf)
training
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link to page 18
Statutory Citation
Number of
Total Outstanding
Average
and Program
Repayment
Schools
Number of
Loan Balance
Outstanding Loan
Website
Borrower Type
Terms
Participating
Outstanding Loans
($ in thousands)
Balance
graduate degree in

Renegotiation and
nursing
forbearance permitted

Eligible for consolidation
into Direct Loan program
Nurse Faculty Loans
42 U.S.C. §297n-1
Students who are

Repayment schedule of 10
80
2,277c
$75,000
$32,938
(https://www.hrsa.gov graduate-level nurses
years
/grants/find-funding/
interested in

hrsa-20-004)
becoming nurse

3% interest rate
faculty

Up to 85% of a
borrower’s loan balance
may be cancel ed over
four years for borrowers
who are nurse faculty.
Individuals are responsible
for paying the balance,
plus interest, of their loan
at the end of four years

Deferment while pursuing

Advanced professional
training in nursing

Forbearance permitted

Eligible for consolidation
into Direct Loan program
Source: CRS Analysis of Titles VII and VIII of the Public Health Service Act and 42 C.F.R. Part 57, Subparts C and D. Data obtained from the Health Resources and
Services Administration (HRSA) on June 4, 2020, July 14, 2020, and October 23, 2020.
a. Primary health care is defined as family medicine, general internal medicine, general pediatrics, preventive medicine, or osteopathic general pra ctice.
b. Students from disadvantaged backgrounds refers to individuals who are from backgrounds that have inhibited the individuals from obtaining the knowledge, skil s, and
abilities required to graduate from a school, or who are from a low-income family as defined by the program.
c. The Nurse Faculty Loan Program (NFLP) issued 2,277 loans, but made loans to 2,303 borrowers. The number of borrowers is higher than the number of loans
because some of these borrowers received loans prior to 2018 but did not receive loans for the 2018 -2019 academic year. Such borrowers may have not received
CRS-15

loans for various reasons, for example, because they were in the dissertation phase of their training or had taken a leave of absence. HRSA requires that institutions
track each borrower who received an NFLP loan until the borrower has graduated or has otherwise left the program (i.e., attrition).
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Student Loan Programs Authorized by the Public Health Service Act: An Overview

NFLP Loan Cancellation Data
In addition, data are available on the amount of cancel ation benefits received under the NFLP. As
previously described, up to 85% of a borrower’s outstanding NFLP balance may be cancel ed in
exchange for serving for four years as a nurse faculty member at accredited nursing schools. For
academic year 2018-2019, the most recent year for which data are available, the average amount
of cancel ation benefits received was $25,571 dollars, representing a total of approximately $42
mil ion in cancel ation benefits for 1,652 borrowers.58
Health Education Assistance Loan (HEAL) Program
PHSA Title VII Part A-I authorizes the HEAL program, which made loans available to qualifying
health professions students from FY1978 through FY1998. Congress terminated the authority to
make new HEAL Program loans after September 30, 1998,59 however, many program loans
remain outstanding, and the federal government is responsible for administering the program.
HHS original y administered the program, but the Consolidated Appropriations Act, 2014 (P.L.
113-76), transferred administration of the program to the Department of Education (ED). As of
November 15, 2017, HEAL program loans totaling approximately $187 mil ion, borrowed by
11,390 individuals, were outstanding.60
The HEAL program is considerably different than the other student loan programs authorized
under PHSA.61 Unlike the PHSA loan programs discussed above, under the HEAL program,
private sector and state-based lenders originated loans to qualifying health professions students;
these loans were funded with nonfederal capital. The federal government guarantees lenders
against loss due to borrower default, death, permanent disability, and bankruptcy. Private and
state-based lenders retain ownership of the loans and perform loan servicing functions, such as
bil ing borrowers, collecting loan payments, and initiating collection work on defaulted loans. If a
loan defaults, a HEAL program lender may file an insurance claim with ED. Upon payment of the
claim by ED, the lender transfers the loan to ED, and ownership and responsibility for loan
administration changes from lenders to ED (via its contracted loan servicers and privacy
collection agencies).62
HEAL program loan terms and conditions general y are prescribed in statute and general y remain
the same upon transfer to ED. 63

58 An academic year is July 1-June 30.
59 42 U.S.C. §292a(a). T he ability to refinance or consolidate existing HEAL program loans within the HEAL program
expired September 30, 2004. HEAL program loan borrowers currently may consolidate their loans into a Direct
Consolidation Loan. 20 U.S.C. §§1078-3(d)(1)(C)(ii) and 1087e(a)(1).
60 U.S. Department of Education, “Health Education Assistance Loan (HEAL) Program,” 82 Federal Register 53377,
November 15, 2017.
61 42 U.S.C. §292 et seq.
62 42 U.S.C. §292f(b)
63 Loan terms and conditions may vary slightly in specific instances once transferred to ED. For example, HEAL
program loans owned by ED are eligible for the temporary suspension of interest and monthly payments provided to
borrowers of ED-held loans in response to the coronavirus disease 2019 (COVID-19) pandemic, but borrowers of
HEAL program loans not held by ED are ineligible for such benefits. U.S. Department of Education Office of Federal
Student Aid, “Coronavirus and Forbearance Info for Students, Borrowers, and Parents,” https://studentaid.gov/
announcements-events/coronavirus, accessed October 26, 2020.
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Student Eligibility
HEAL program loans were available to eligible graduate students64 enrolled in schools of
medicine, osteopathy, dentistry, veterinary medicine, optometry, podiatry, public health,
pharmacy,65 and chiropractic, or in programs in health administration and clinical psychology.66 In
addition, eligible nonstudents (e.g., doctors serving as residents or interns) were able to borrow
new HEAL program loans to pay interest charges that accrued on earlier HEAL program loans.67
Final y, regardless of whether a borrower was a student or nonstudent, regulations specified that
lenders were to make HEAL program loans only to applicants whom the lender had determined to
be creditworthy.68
Loan Terms and Conditions
Interest Rates
At the lender’s option, HEAL program loans were made with fixed or variable interest rates, but
the selected option remains effective for the life of the loan. Lenders set borrowers’ loan interest
rates within certain parameters. For instance, borrower rates may not exceed the applicable
maximum borrower interest rate calculated by the Secretary of Education (the Secretary).69 For
loans with fixed interest rates, the applicable maximum interest rate over the life of the loan is
calculated using statutorily specified rate setting formulae, which are used to determine
applicable fixed rates for the calendar quarter in which the loan was made. For loans with
variable interest rates, the applicable maximum interest rate is determined using the same
statutorily specified rate setting formulae, but changes each calendar quarter.70 The formulae used
by the Secretary to calculate the maximum interest rate vary depending on when the loan was
made, but for al loans made on or after October 22, 1985, the maximum interest rate is pegged to
the 91-day U.S. Treasury Bil auctioned for the preceding quarter, plus three percentage points,
and rounded to the next higher one-eighth of one percent.71 For example, for the quarter ending
December 31, 2020, the maximum variable interest rate for loans made on or after October 22,

64 Additional eligibility criteria included, for example, that an individual be a U.S. citizen, national, or lawful
permanent resident of the United States and be enrolled as a full-time student.
65 Individuals pursuing bachelor’s degrees in pharmacy were also eligible for HEAL program loans.
66 34 C.F.R. §681.5.
67 34 C.F.R. §681.6.
68 An applicant was considered creditworthy if he or she had “a repayment history that ha[d] been satisfactory on any
loans on which payments ha[d] become due.” An applicant was not considered creditworthy if he or she was in default
on any loan or delinquent on any federal debt, until the defaulted or delinquent account was made current or until
satisfactory arrangements were made between the lender of the delinquent or defaulted loan and the HEAL program
applicant. 34 C.F.R. §681.33(c).
69 Although the Servicemembers Civil Relief Act caps the maximum interest charged on any debt incurred by a
servicemember prior to entering active duty service at no higher than 6% per year for the duration of their active duty
service, the cap does not appear to apply to HEAL program loans. Specifically, 42 U.S.C. §292d(d) states, “ No
provision of any law of the United States … or of any State that limits rate or amount of interest payable on loans shall
apply” to a HEAL program loan.
70 42 U.S.C. §292d(a) and (b); 34 C.F.R. §681.13
71 See, for example, 34 C.F.R. §681.13(a)(1).
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1985, is 3.125%.72 Interest accrues on the loan from the date it is disbursed until it is paid in full
(i.e., no interest subsidy is provided).73
Repayment
Borrowers are required to repay their HEAL program loans during a repayment period, which
typical y begins after a nine-month grace period.74 In general, lenders determine the length of the
loan repayment period; however, the repayment period may not be less than 10 years and not
greater than 25 years. A borrower must repay his or her loan in full within 33 years from the date
the loan is made.75 Typical y, payments must be made on a monthly basis and may be made in
equal or graduated instal ments, with graduated instal ment payments increasing in amount over
the repayment period.76 Lenders are required to offer an income-contingent repayment schedule
that, during the first five years of repayment, is based on a borrower’s income.77 In general, total
annual payments must equal at least the amount of interest that accrues during the year.78 A
borrower may prepay al or part of the loan at any time, without penalty.79
Eligible borrowers may consolidate their HEAL program loans into a Direct Loan program
Consolidation Loan. If a borrower does so, the borrower repays the resulting Direct Consolidation
Loan under the terms and conditions of the Direct Loan program.
HEAL program borrowers who are having difficulty making payments may receive a loan
deferment or forbearance. Unlike the other loan programs authorized under the PHSA, interest on
HEAL program loans continues to accrue during periods of deferment. Deferment may be granted
to a borrower in the following circumstances:80
 while pursuing a full-time course of study at an institution of higher education as
defined in Section 102(a) of the Higher Education Act;

72 Department of Education, Office of Federal Student Aid, “HEAL Interest Rates,” https://ifap.ed.gov/heal-interest-
rates.
73 34 C.F.R. §681.13(b).
74 34 C.F.R. §681.11(a)(1). Generally, the grace period commences when a borrower ceases to be enrolled full -time at a
HEAL program school. However, if a borrower meets specified conditions (e.g., enters an internship, residenc y, or
fellowship training program), the start of the repayment period may be further postponed.
75 34 C.F.R. §681.11(b). For loans made prior to October 22, 1985, deferment periods are not included in any of the
repayment period thresholds. For loans made o n or after October 22, 1985, periods of deferment are included in the 33 -
year limitation, but are excluded from the 10- and 25-year limitations. For loans made on or after October 13, 1992,
periods of forbearance are excluded from the 25 -year limitation. 42 U.S.C. §292d(e) and U.S. Department of
Education, Office of Federal Student Aid, “Health Education Assistance Loan (HEAL) Program,” https://ifap.ed.gov/
sites/default/files/attachments/2019-07/AboutHEALProgram.pdf [hereinafter FSA, HEAL], p. 2.
76 34 C.F.R. § 681.11(e). In addition, a lender or loan holder and a borrower may enter into a supplemental repayment
agreem ent under which a lender or holder “ agrees to consider that the borrower has met the terms of the regular
repayment schedule as long as the borrower makes payments in accordance with the supplemental schedule.” A
supplemental repayment schedule may be based on other than an equal or graduate pay ments, for example, the
borrower’s income. 34 C.F.R. §681.11(f).
77 FSA, HEAL, p. 1.
78 34 C.F.R. §681.11(d). Borrowers and lenders may agree, in writing, that payments for any year or repayment period
equal a lesser amount.
79 34 C.F.R. §681.11(c).
80 42 U.S.C. §292d(a)(2)C).
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 up to four years while participating in an accredited internship or residency
program;81
 up to two years while participating in a qualified fel owship training program or
educational activity at an eligible institution;82
 up to three years for full-time active duty in the U.S. Armed Forces;
 up to three years while serving in the Peace Corps, the National Health Service
Corps, or on a full-time basis in Volunteers in Service to America (VISTA);
 up to three years for a borrower who has completed a qualifying internship or
residency training program and who is practicing primary care;83
 up to one year for borrowers who are graduates of schools of chiropractic; and
 up to three years while providing health care services to Indians through any
health program or facility wholly or partial y funded by the Indian Health Service
for the benefit of Indians.
Under the HEAL program, forbearance is a temporary extension of time for making a payment or
a temporary period during which a borrower may make payments in reduced amounts.
Forbearance may be granted in six-month increments up to a maximum of two years. Periods of
forbearance may be extended beyond the two-year limit with approval from the Secretary.
Forbearance is granted if a lender determines that the borrower is temporarily unable to make
scheduled payments on his or her loan but continues to make payments on the loan in an amount
commensurate with his or her ability to repay the loan.84
If a borrower fails to pay al of a required payment (or fails to provide written notification of
eligibility for deferment) to a HEAL program loan holder within 30 days after the payment’s due
date, the holder is required to charge a late fee equal to 5% of the unpaid portion of the payment
due. The loan holder may also charge the borrower for reasonable costs incurred by the holder in
attempting to collect any past-due payments.85 Loan holders must notify appropriate consumer
reporting agencies regarding borrowers whose accounts are at least 60 days overdue.86
Default
General y, a borrower is considered to be in default of a HEAL program loan if he or she fails to
make payment when due or fails to otherwise comply with terms of the loan’s promissory note
for 120 days, in the case of loans paid in monthly instal ments.87 Consequences of borrower
default include those typical of other federal student loan programs, such as referral of defaulted

81 For borrowers who received their first HEAL program loan on or after October 22, 1985, this four -year period
includes any postponement of the repayment period following the initial grace period.
82 34 C.F.R. §681.12(b)(2) references eligible institutions as defined in HEA §435(b). Section 435(b) was repealed by
the Higher Education Amendments of 1992 (P.L. 102-325).
83 Generally residencies in primary care are three years; however, an individual may do a combined residency in two
primary care specialties (e.g., internal medicine and pediatrics) that may exceed three years. Generally, residencies in
non-primary care specialties are longer than three y ears.
84 34 C.F.R. §681.37.
85 34 C.F.R. §681.15(a) and (b).
86 34 C.F.R. §681.35(c)(2).
87 34 C.F.R. §681.40(c)(1). A borrower is considered in default if loan payments are made less frequently than monthly
and the borrower has failed to make such payments for 180 days.
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loans to a collection agency and litigation,88 along with consequences unique to the program,
including89
 reduction of federal reimbursement or payments for health services provided
under federal law (e.g., health services provided under the Medicare program),
up to the remaining balance of the loans;
 publication of the borrower’s name and the fact that he or she has defaulted in the
Federal Register;90 and
 notification of the borrower’s default to relevant federal agencies and to schools,
school associations, professional and specialty associations, state licensing
boards, hospitals with which the borrower may be associated, and other relevant
organizations.91
A borrower may consolidate his or her defaulted HEAL program loan into a Direct Consolidation
Loan under ED’s Direct Loan program by using the proceeds of a new Direct Consolidation to
pay off the defaulted loan. This would effectively cure the default on the HEAL program loan, as
it would be considered paid in full. To be eligible to do so, he or she must make satisfactory
repayment arrangements with the loan holder92 or agree to repay the Direct Consolidation Loan
under one the income-driven repayment plans available under the Direct Loan program.93
Loan Discharge
HEAL program loans may be discharged94 (sometimes referred to as loan cancel ation) if the
borrower dies or becomes permanently and total y disabled.95 HEAL program loans may be
discharged in bankruptcy if specified criteria are met, including a determination by the
Bankruptcy Court that not discharging the loan would be unconscionable.96

88 FSA, HEAL, pp. 2-3.
89 42 U.S.C. §§292f (f), (h) and 292h(c).
90 See, for example, Department of Education, “List of Borrowers Who Have Defaulted on T heir Health Education
Assistance Loans,” 85 Federal Register 60140, September 24, 2020.
91 Some state laws require that an individual’s professional licensure be revoked or suspended if they default on
outstanding loans, including HEAL program loans. See, for example, Jessica Silver -Greenberg, Stacy Cowley, and
Nataile Kitroeff, “When Unpaid St udent Loan Bills Mean You Can No Longer Work,” The New York Times,
November 18, 2017.
92 Regulations do not define “satisfactory repayment arrangements.”
93 34 C.F.R. § 685.220(i)(3)(ii) and U.S. Department of Education, “Direct Consolidation Loan Applicatio n and
Promissory Note: William D. Ford Federal Direct Loan Program,” OMB No. 1845 -0053. Federal Student Loans Made
Through the William D. Ford Federal Direct Loan Program : Term s and Conditions for Borrowers.
94 Borrower of HEAL program loans may be eligible for various other federal loan forgiveness and loan repayment
programs authorized outside of PHSA T itle VII Part A-I. For additional information, see CRS Report R43571, Federal
Student Loan Forgiveness and Loan Repaym ent Program s.
95 42 U.S.C. §292m. T he Secretary of Education discharges HEAL program loans due to a borrower’s total and
permanent disability in accordance with the same procedures used for Direct Loan program loans. 34 C.F.R.
§681.39(b).
96 42 U.S.C. §292f(g). T his standard differs from the more generally applicable standard that student loans are
presumptively not dischargeable in bankruptcy absent an undue hardship. For additional information on the
dischargeability of student loan debt in bankruptcy, see CRS Report R45113, Bankruptcy and Student Loans.
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Appendix. Glossary of Terms
Acceleration
Demand for immediate repayment of the entire outstanding (unpaid) balance of a loan.
Consolidation
The process through which a borrower refinances his or her existing student loan by
borrowing a new loan and using the proceeds to pay off existing student loan
obligations.
Default
The failure of a borrower to make an instal ment payment on a loan when due, or to
comply with any other terms of the promissory note for the loan.
Deferment
A temporary period during which a borrower’s obligation to make regular payments of
principal and interest is suspended, if the borrower meets applicable eligibility criteria.
Forbearance
Active PHSA Loan Programs: A period during which a borrower’s obligation to make
payments on a loan’s principal (balance) is temporarily suspended.
HEAL Program: A period during which a borrower may extend the time for making
payments or temporarily make smal er payments.
Grace period
A temporary period after a borrower ceases to meet specified enrol ment status (ful -
time or part-time), during which the borrower is not required to make payments on his
or her loan and during which interest does not accrue.
Prepayment
A loan payment made before it is due under the terms of the loan.
Promissory note
A contract between a lender and a borrower that contains the terms and conditions of
the loan.
Repayment period
The time during which a borrower is obligated to make payments on a loan according
to the terms and conditions of the loan.
Repayment
The schedule on which borrowers are required to make loan payments. Repayment
schedule
schedules include a due date for each payment, the amount credited to principal and
interest from each payment, and any minimum payment amounts that may be required.
Renegotiation
A process through which a loan’s repayment schedule is adjusted. It is used when a
borrower is able to make payments on a regular basis but is unable to pay the amount
required to keep his or her account current according to the existing repayment
schedule.
Sources: These definitions are based on Titles VII and VIII of the Public Health Service Act; 34 C.F.R. Part 681;
42 C.F.R. 57; Subparts C and D, Health Resources and Services Administration (HRSA) Student Financial Aid
Guidelines for Health Professions Student Loans, Loans for Disadvantaged Students, Primary Care Loans, and
Nursing Student Loans, available at Health and Human Services (HHS), HRSA, “School-Based Loans and
Scholarships,” https://bhw.hrsa.gov/loans-scholarships/school-based-loans; HHS, HRSA Nurse Faculty Loan
Program, “Nurse Faculty Loan Program (NFLP) Administrative Guidelines,” https://www.hrsa.gov/sites/default/
files/hrsa/grants/faqs/NFLP-admin-guidelines-2017.pdf; and HHS, HRSA, “Student Financial Aid Guidelines, Fiscal
Management, Accounting Procedures,” https://bhw.hrsa.gov/sites/default/files/bureau-health-workforce/funding/
fiscal-management-accounting.pdf.

Author Information

Elayne J. Heisler
Alexandra Hegji
Specialist in Health Services
Analyst in Social Policy

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Student Loan Programs Authorized by the Public Health Service Act: An Overview

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shared staff to congressional committees and Members of Congress. It operates solely at the behest of and
under the direction of Congress. Information in a CRS Report should n ot be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
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