(a) Liquidated Damages.—(1) A participant in the Program (other than a participant described in subsection (b)) 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 section 7604 of this title shall be liable to the United States for liquidated damages in the amount of $1,500.

(2) Liability under paragraph (1) is in addition to any period of obligated service or other obligation or liability under such agreement.

(b) Liability During Program of Study.—(1) Except as provided in subsection (d), a participant in the Program shall be liable to the United States for the amount which has been 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 the educational institution under regulations prescribed by the Secretary).

(B) The participant is dismissed from such educational institution for disciplinary reasons.

(C) The participant voluntarily terminates the program of study in such educational institution before the completion of such program of study.

(2) Liability under this subsection is in lieu 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 period of obligated service of the participant, the United States shall be entitled to recover from the participant an amount determined in accordance with the following 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 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.

(C) "t" is the total number of months in the period of obligated service of the participant.

(D) "s" is the number of months of such period served by the participant.

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

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