State Health Service Corps Demonstration Act

State Health Service Corps Demonstration Act - Amends the Public Health Service Act to direct the Secretary of Health and Human Services to establish a State Health Service Corps Demonstration Project.

Directs the Secretary to make grants under the Project to up to three States for the Federal share of training and employment of physician and nonphysician providers serving health manpower shortage areas.

Requires a recipient State to enter into an agreement with an area health education center for the planning, development, and operation of a program of such training and employment. Sets forth the responsibilities of a center.

Authorizes appropriations.

Requires each State carrying out a Project to establish a State Health Service Corps Scholarship Program involving a period of service in the service area or on the clinical staff of a medical school in return for a loan (for undergraduate study) or a scholarship (for graduate education, internship, or residency).

Authorizes the official heading the State agency administering the Program to contract with an educational institution for the payment of scholarship or loan amounts.