It's not damaged 'permanent records'. Federal law states that a student's records are private, so it's not like they can be requested outside of the university. The solution you suggest would leave someone with a whole 12 month gap where, to be honest, most people would lie and say they had to work for school, instead of explaining what really happened to cause a 12 month gap. Also, I have no idea how your suggestion would work in terms of scholarships and student loans.

The solution I suggested would perhaps make it harder for a student to take a certain class if a professor doesn't allow students with 'records' into their class, but a lot easier than a 12 month expulsion.