.10 Conversion of Scholarship to Loan.

A. Except as provided in §C of this regulation, if the recipient breaches the terms or conditions of the agreement or note under Regulation .09 of this chapter, including the failure to perform the service obligation, the scholarship shall convert to a student loan payable to the State.

B. Interest on the loan shall be charged at an interest rate equal to the interest rate established by the United States Department of Education for the Federal Stafford Loan on the first day of July of each year.

C. Interest may not accrue prior to notification to the Office of a recipientís graduation or termination from an institution of higher education.

D. Repayment may be prorated if the recipient partially fulfills the service obligation.

E. Except as otherwise provided in this regulation, repayment shall be made to the State within 6 years after the repayment period begins, and shall follow a repayment schedule established by the Office.