There shall be two types of awards as follows:

(1) LOANS. A number of loans equal in number to 20 percent of the student body of the medical schools in the State of Alabama, each in an amount of up to the average cost of tuition, fees, and living expenses, as set forth in the current catalogs of the University of Alabama School of Medicine or the University of South Alabama College of Medicine, for the year of each enrollment. These loans shall be available to any resident of Alabama of good character who has been accepted for matriculation by one of the medical schools of Alabama preference being given to those applicants who can show an economic need, and who commit in writing to practice in a rural area in a generalists specialty as determined by the board. The board may, in its discretion, permit students to apply for a loan under this subdivision in any scholastic year and for any previously completed scholastic year of medical education. These loans shall be repaid following graduation, under the terms of a contract to practice clinical medicine in an area of Alabama identified by the board as medically underserved for a term of years, as hereinafter set forth.

(2) MERIT SCHOLARSHIPS. A number of merit scholarships equal in number to five percent of the student body of the medical schools in the State of Alabama, each in an amount not to exceed $5,000 (five thousand dollars) per annum or $20,000 (twenty thousand dollars) over a four-year period shall be granted to students with high scholastic achievement and excellent character who will attend one of the medical schools of the State of Alabama. The students to whom merit scholarships are granted shall not be obligated to repay the amount of the scholarship award.