It's here! H.R.4170 is called the Student Loan Forgiveness Act of 2012. It was introduced in March by Rep. Hansen Clarke (D-MI) and has 12 co-sponsors, all democrats.
The bill sets payments to ten percent of the difference between the borrower's income and 150% of the poverty income level - and then divides that by 12 for the monthly amount. It's possible for that amount to be $0, by the way. The payments MUST be automatically debited from a bank account. Borrowers may apply for a deferment for financial hardship and pay nothing. The bill even acknowledges the potential for "abuse of the relief" so there's a section to set the payment at some level based on the specific circumstances of the borrower.
After paying for 10 years, including any months that the payment could have been $0, the loan is forgiven up to $45,520. Interestingly, any forgiven amount may not be included as income for tax purposes.
I'm sure backers will dismiss claims of moral hazard since payments are required and there's a cap on the amount that may be forgiven. It's already being called an "economic stimulus" plan. Call it what you want, but a bailout is a bailout.
It's also a blatant attempt to buy votes. I wrote about this possibility last September. I asked "Do you think students will back a candidate or a party willing to negate their financial liability?" It sure sounds attractive, doesn't it?
Cross-posted at noranndillon.com