(a) The Tennessee student assistance corporation (TSAC) shall administer a loan-scholarship program for graduate students in professional nursing under the following terms and conditions:

(1) Any resident of this state who becomes a candidate for a master's degree in nursing, or any resident with a master's degree in nursing who becomes a candidate for a doctoral degree program in nursing or a related field that would qualify the person to become a teacher, administrator or supervisor in nursing, shall be eligible to apply to TSAC for a loan-scholarship in an amount established by TSAC, not to exceed the cost of attendance for an academic year to attend an approved graduate school of nursing or an approved doctoral program in nursing or a related field. The loan-scholarship may be received for a maximum of four (4) years. Preference in awarding loan-scholarships shall be given to persons who can enter faculty or administrative positions in this state immediately upon completion of their master's or post-master's degree program;

(2) For each year of continuous full-time teaching service in a nursing school in this state that has been approved by the state board of nursing in this state, the student shall receive a credit of twenty-five percent (25%) of the amount borrowed plus interest, or proportionate credit for part-time teaching service as defined by rules; and

(3) All loan-scholarships shall be evidenced by notes payable to TSAC, which shall bear interest at an annual rate of interest to be determined by TSAC from and after the completion of the educational program. The notes shall be executed pursuant to the rules and regulations of TSAC. If the recipient does not remain in, or return to, this state to teach or practice, the person shall be required to repay the full value of loan-scholarship funds received at an annual rate of interest to be determined by TSAC from the date of completion of the educational program. The permanent withdrawal or dismissal of any recipient, or the failure of any recipient to do college work in a manner acceptable to TSAC, shall immediately forfeit the recipient's right to retain the loan-scholarship. Any loan made under this section shall be cancelled by the death or the permanent and total disability of the recipient.

(b) TSAC, in conjunction with the Tennessee board of nursing, is authorized to promulgate rules and regulations for the management of the program and the selection of recipients, taking into consideration such factors as academic record of the applicant and shortage areas in the nursing force in this state.

(c) TSAC may receive contributions from outside sources for funding the loan-scholarship program under conditions prescribed by TSAC, with the understanding that the funds will be used solely for awards under this section and unused funds shall not revert to the general fund, but shall be carried forward for future student awards.

(d) Funding from the state shall not revert to the general fund but shall be carried forward to the next fiscal year for future student awards.

(e) This program shall be available for participants beginning July 1, 2006, after rules have been promulgated. TSAC is authorized to use emergency rulemaking in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5. The availability of scholarships shall be subject to the appropriation of funds in each year's general appropriations act.