(a) Except as provided under (b) and (c) of this section, as a condition of participating in a medical education program under AS 14.42.033, a program participant shall agree to either return to the state and actively engage in professional medical practice or repay financial support provided by the state on behalf of the program participant. The financial support to be repaid is equal to 50 percent of the amount paid for each program participant by the state to the contracting postsecondary institution, plus interest. The rate of interest is equal to the 12th Federal Reserve District discount rate in effect on March 1 of the year in which the financial support is provided plus two percentage points. Interest imposed under this subsection begins to accrue when the person terminates studies under the medical education program. Accrued interest shall be added to the principal balance of the repayment obligation at the time the borrower is obligated to commence repayment and at the end of a deferment period.

(b) If a program participant under (a) of this section has graduated from the medical education program for which the financial support was received and is employed in the state in the field for which the person received the financial support, including employment in the state in a medical residency program, the repayment obligation shall be forgiven and considered a grant in an amount equal to the following percentages plus accrued interest:

(1) for employment in rural areas of the state,

(A) one year employment, 33 1/3 percent;

(B) two years employment, an additional 33 1/3 percent;

(C) three years employment, an additional 33 1/3 percent;

(2) for employment in areas of the state that are not rural,

(A) one year employment, 20 percent;

(B) two years employment, an additional 20 percent;

(C) three years employment, an additional 20 percent;

(D) four years employment, an additional 20 percent;

(E) five years employment, an additional 20 percent.

(c) Repayment under (a) of this section is required to begin not later than six months after the person terminates studies under the medical education program except that repayment shall be deferred for a person who (1) qualifies for forgiveness under (b) of this section for as long as the person remains qualified for forgiveness under (b) of this section; (2) is employed in a medical residency program for as long as the person remains in the medical residency program; or (3) is performing a service obligation imposed by the National Health Service Corps, the Indian Health Service, or the Uniformed Service Scholarship Program for as long as the person is performing the service. Forgiveness under (b) of this section only applies to that portion of the repayment obligation that has not been repaid to the state.

(d) If a person meets the qualifying conditions under this section for forgiveness after beginning repayment, the repayment requirement is deferred in the month following qualification for forgiveness. Repayment shall be deferred as long as the person remains qualified or until the balance of the repayment obligation has been fully forgiven. If the person is delinquent or in default on the person's regular repayment schedule, repayment shall continue until the person is current in payments. A period of time during which the person is making past due payments may not be considered as a qualifying period for the purpose of calculating forgiveness benefits.

(e) For purposes of qualifying for forgiveness under this section, a person must be a full-time employee for a period of at least six months in order to qualify for a prorated forgiveness benefit. In this subsection, “full-time employee” does not include seasonal or temporary employment.

(f) A person's obligation to repay under this section ends if the person dies and is deferred during any period in which a physician certifies that the person is totally disabled.

(g) This section does not apply to loans received by a person under AS 14.43.010 - 14.43.160 or 14.43.710 - 14.43.750.

(h) The commission may adopt regulations to implement this section. Except as provided in this section, regulations adopted under this subsection may not exempt or defer a repayment required under this section.

(i) In this section, “rural” means a community with a population of 7,500 or less that is not connected by road or rail to Anchorage or Fairbanks or with a population of 3,500 or less that is connected by road or rail to Anchorage or Fairbanks.