Please read the guidelines carefully and you will find the answers to all of your questions in there. So, I make it short: Yes, it's very possible to reach level 3 after one year if you study hard enough. If you don't get that level after one year you have to take another 6 months of language classes. NIIED pays for two TOPIK tests during the one year of language classes if you want to take more you have to pay for yourself, but it's not that expensive. If you reach TOPIK level 5 they will raise your allowance. I guess this is to motivate the students to study hard.