---
kind: "section"
citation: "34 C.F.R. § 386.43"
title: "34"
number: "386.43"
heading: "What are the consequences of a scholar's failure to meet the terms and conditions of a scholarship agreement?"
url: "https://uscodex.org/cfr/34/386.43"
---

# §386.43. What are the consequences of a scholar's failure to meet the terms and conditions of a scholarship agreement?


In the event of a failure to meet the terms and conditions of a scholarship agreement or to obtain a deferral or an exception as provided in [§ 386.41](/cfr/34/386.41.md), the scholar must repay all or part of the scholarship as follows:

- (a) **Amount.** The amount of the scholarship to be repaid is proportional to the employment obligation not completed.
- (b) **Interest rate.** The Secretary charges the scholar interest on the unpaid balance owed in accordance with [31 U.S.C. 3717](/usc/31/3717.md).
- (c) **Interest accrual.**
  - (1) Interest on the unpaid balance accrues from the date the scholar is determined to have entered repayment status under [paragraph (e)](#e) of this section.
  - (2) **Any accrued interest is capitalized at the time the scholar's repayment schedule is established.**
  - (3) No interest is charged for the period of time during which repayment has been deferred under [§ 386.41](/cfr/34/386.41.md).
- (d) **Collection costs.** Under the authority of [31 U.S.C. 3717](/usc/31/3717.md), the Secretary may impose reasonable collection costs.
- (e) **Repayment status.** A scholar enters repayment status on the first day of the first calendar month after the earliest of the following dates, as applicable:
  - (1) The date the scholar informs the Secretary he or she does not plan to fulfill the employment obligation under the agreement.
  - (2) Any date when the scholar's failure to begin or maintain employment makes it impossible for that individual to complete the employment obligation within the number of years required in [§ 386.40(a)(8)](/cfr/34/386.40.md?p=a-8).
- (f) **Amounts and frequency of payment.** The scholar shall make payments to the Secretary that cover principal, interest, and collection costs according to a schedule established by the Secretary.

## Notes

### Authority

Authority: Sections 12(c) and 302 of the Rehabilitation Act of 1973, as amended; 29 U.S.C. 709(c) and 772, unless otherwise noted.

### Source

Source: 81 FR 55619, Aug. 19, 2016, unless otherwise noted.