(a) Liquidated damages. Except as provided in paragraph (b) of this section, a participant of the RCSSP who fails to accept payment or instructs the educational institution in which the participant is enrolled not to accept payment, in whole or in part, of a scholarship under the agreement entered into under § 17.551 will be liable to the United States for liquidated damages in the amount of $1,500.

(b) Liability during program of study. Liability under this section is in lieu of any service obligation arising under the agreement. Except as provided in paragraph (d) of this section, a participant of the RCSSP will be liable to the United States for the amount that has been paid to or on behalf of the participant under the agreement if any of the following occurs:

(1) The participant fails to maintain an acceptable level of academic standing in the educational institution in which the participant is enrolled, as determined by the educational institution;

(2) The participant is dismissed from the educational institution for disciplinary reasons; or

(3) The participant voluntarily terminates the program of study in the educational institution before the completion of the program of study for which the RCSSP was awarded.

(c) Liability during period of obligated service. Except as provided in paragraph (d) of this section, if a participant of the RCSSP does not complete their period of obligated service, the United States will be entitled to recover from the participant an amount determined in accordance with the following formula: A = 3Φ(t−s/t), where:

(1) `A' is the amount the United States is entitled to recover;

(2) `Φ' is the sum of:

(i) The amounts paid under this subchapter to or on behalf of the participant, and

(ii) The interest on such amounts, which would be payable if at the time the amounts were paid they were loans bearing interest at the maximum legal prevailing rate, as determined by the Treasurer of the United States.

(3) `t' is the total number of months in the period of obligated service of the participant; and

(4) `s' is the number of months of such period served by the participant.

(d) Limitation on liability for reductions-in-force. Liability will not arise under paragraph (c) of this section if the participant fails to maintain employment as a VA employee due to a staffing adjustment.

(e) Repayment period. The participant will pay the amount of damages that the United States is entitled to recover under this section in full to the United States no later than one year after the date of the breach of the agreement.