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ARIZONA STATE SENATE
Fifty-Fourth Legislature, Second Regular Session
medical student loan program
Purpose
Outlines liquidated damages against a loan recipient who fails to fulfill their contract. Allows the Board of Medical Student Loans (Board) to waive penalties and modifies Board membership.
Background
The Board was established in 1978 and consists of eight members including: 1) two members appointed by the Chairman of the Arizona Medical Board (AMB); 2) three members appointed by the Governor who are knowledgeable about health care problems in Arizona; 3) one member appointed by the University of Arizona (UA) President from the staff of the UA College of Medicine; 4) one licensed doctor of osteopathy (DO) appointed by the Board of Osteopathic Examiners in Medicine and Surgery (Osteopathic Board); and 5) the Department of Health Services (DHS) Director or their designee, who is an ex officio nonvoting member. Board members serve four-year terms (A.R.S. § 15-1722).
The Board provides loans from the Medical Student Loan Fund (Fund) for medical education expenses of qualified students at a public or private school of medicine in Arizona who intend to enter and complete an approved residency program. Loans are approved for up to $20,000 each year for each student's tuition plus a living allowance (A.R.S. § 15-1723). There are currently six medical schools in Arizona.
A loan recipient who does not fulfill the condition of providing medical services in an approved service location must repay the full amount borrowed, including tuition, at the seven percent interest rate, in addition to a penalty for liquidated damages in an amount equivalent to the full amount borrowed, including tuition, less an amount credited for time actually served. The Board can waive the payment if it determines the recipient's failure to fulfill the contract is due to death or permanent physical disability. A recipient who withdraws or is dismissed from medical school is required to repay the loan plus interest with no penalty within one year of withdrawal (A.R.S. § 15-1724).
According to the Joint Legislative Budget Committee, the Fund had a balance of $46,800 as of FY 2019, and the Fund has not received any new appropriations since FY 2012 (JLBC FY 2020 Baseline).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Modifies penalties for liquidated damages for a loan recipient who does not fulfill their contract conditions as follows:
a) no penalty for a loan recipient who withdraws from the program while in medical school;
b) 10 percent of the loan amount for a recipient who withdraws from the program during residency; or
c) 25 percent of the loan amount for a recipient who withdraws from the program while serving as a physician in the area listed on the recipient's contract.
2. Allows the Board to waive the penalty for liquidated damages if it determines a recipient failed to fulfill the contract due to death or permanent physical disability.
3. Modifies the Board membership as follows:
a) adds one representative from each accredited Arizona medical school appointed by the president or chief officer of that medical school;
b) removes the two members appointed by the AMB Chairman;
c) removes the three members appointed by the Governor;
d) removes the member appointed from the UA College of Medicine staff and the UA President; and
e) removes the DO appointed by the Osteopathic Board.
4. Removes the requirement that at least 50 percent of Fund monies be apportioned for students attending private medical schools.
5. Removes DHS from Fund administration.
6. Specifies all appropriated monies and penalties received by the Board will be deposited in the Fund.
7. Allows current Board members to complete their normal terms, upon the general effective date.
8. Makes technical and conforming changes.
9. Becomes effective on the general effective date.
Prepared by Senate Research
February 6, 2020
JO/JP/gs