Let's look at the numbers.
Fair Payment Assurance (text of S.359) means that you can have the option of reducing your loan payments to no more than 15% of your "discretionary income"--meaning, your income over 150% of the poverty line for your family size.
So if you make $15,315 or less--no "discretionary income," $0 loan payments.
Let's say you make $20,000 a year and have $30,000 in loans. Currently you'd pay $345 a month under standard repayment, $208 under extended repayment. That's a big bite out of a monthly take-home of about $1400.
Under Fair Payments you'd pay just 15% of ($20K-$15,315), or $58.50 a month.
Or let's take a single mom with two kids who earns $40,000 a year and has $40,000 in loans. Her standard payment would be $460. Her "fair payment" would be $178.
Under these scenarios, "fair payments" are fair from one point of view but not from another. They are low enough to be manageable even on low incomes, but they don't even cover the interest. This means that if you opt for fair payments, either you better hope your income goes up dramatically so you can get back into standard repayment, or you better be prepared to make these small token payments for 25 years until your debt is finally erased.
To my mind, one looming issue with fair payments is the effect on credit ratings. High student loan balances can affect credit scores, although not as much as messed-up payment histories will. If people go into fair payment plans, their loan balances will actually grow year after year , until they are erased, because the payments don't cover the interest. What kind of effect will this have over a lifetime?
A second issue is, as raised in the comments, who's going to pay for this? Let's take the first example: a person who borrowed $30,000; under today's interest rates and standard repayment they would pay back $41,428.
Under "fair payments," if their income did not go up, they would pay back $702 a year for 25 years, or a total of $17,550. Who's going to pay the rest of the loan balance and the accumulated interest? Is the government going to supplement the payments each month to the lender and avoid having interest accrue?
Personally, I'm on the record in favor of having the federal government heavily subsidize college costs, but I want to make sure that we know what we're getting into and that the subsidies are available to those who need them most. One of the problems with subsidizing college costs through Fair Payments is that it requires someone to take on the debt and the risk up front.