(a) In the event that the participant defaults on or otherwise fails to honor a loan-repayment contract with the board for any reason, the individual shall be liable for immediate repayment of the total principal loan amount plus interest at the rate of eight percent, or the prime lending rate, whichever is greater, accruing from the date of default or other failure to honor the contract. In addition, the participant shall pay an additional penalty as specified:

(1) For default or other failure to honor a contract under which a year’s worth of loans have been received, a penalty equal to 20 percent of the total principal amount of the loan.

(2) For default or other failure to honor a contract under which two years’ worth of loans have been received, a penalty equal to 30 percent of the total principal amount of the loan.

(3) For default or other failure to honor a contract under which three or more years’ worth of loans have been received, a penalty equal to 40 percent of the total principal amount of the loan.

(4) If default or other failure to honor a contract occurs after graduation with a graduate degree in advanced-practice nursing but prior to completion of the repayment obligation set forth in Section 34-21-96, a penalty equal to 100 percent of the total principal amount of all loans received by the participant from the program.

(b) The failure of a participant to honor his or her contract with the board or to pay the amount he or she is liable for under this article shall constitute a ground for the revocation of his or her license to practice nursing.

(c) The board may excuse repayment of a loan, in whole or in part, upon the death of a participant, or upon the participant becoming disabled to the extent that he or she is no longer able to engage in the practice of nursing, or upon some other extreme hardship not the fault of the participant.