38 U.S.C. § 7699B — Breach of agreement: liability

(a) Liquidated Damages — (1) A participant in the Program, other than a participant described in subsection (b), is liable to the United States for liquidated damages of $1,500 if the participant fails to accept, or instructs the educational institution in which the participant is enrolled not to accept, all or part of a scholarship under the agreement entered into under section 7604 of this title. (2) Liability under paragraph (1) is in addition to any period of obligated service or other obligation or liability under that agreement.

(b) Liability During Program of Study — (1) Except as provided in subsection (d), a participant in the Program is liable to the United States for the amount paid to or on behalf of the participant under the agreement if any of the following occurs: (A) The participant fails to maintain an acceptable level of academic standing in the educational institution in which the participant is enrolled, as determined by that institution under regulations prescribed by the Secretary^*. (B) The participant is dismissed from that institution for disciplinary reasons. (C) The participant voluntarily ends the program of study in that institution before completing it. (2) Liability under this subsection takes the place of any service obligation arising under the agreement.

(c) Liability During Period of Obligated Service — (1) Except as provided in subsection (d), if a participant in the Program does not complete the participant’s period of obligated service, the United States is entitled to recover from the participant an amount determined by this formula: A = 3Φ × (t−s)/t. (2) In the formula in paragraph (1): (A) “A” is the amount the United States is entitled to recover. (B) “Φ” is the sum of (i) the amounts paid under this subchapter to or on behalf of the participant; and (ii) the interest on those amounts that would be payable if, when the amounts were paid, they were loans bearing interest at the maximum legal prevailing rate, as determined by the Treasurer of the United States. (C) “t” is the total number of months in the participant’s period of obligated service. (D) “s” is the number of months of that period served by the participant.

(d) Limitation on Liability for Reductions-in-force — Liability does not arise under subsection (c) if the participant fails to maintain employment as a Department^* employee because of a staffing adjustment.

(e) Period for Payment of Damages — Any amount of damages that the United States is entitled to recover under this section must be paid to the United States within the one-year period beginning on the date of the breach of the agreement.