5 State-Level Ideas to Keep College Grads Out of Crushing Debt

NEW YORK (MainStreet) — For the past 30 years, states have been anything but allies to college students. Their share of higher education funding has dropped by 31.2% per student since 2001, according to the State Higher Education Finance Officers Association, leaving the college-bound and their families to shoulder an ever larger share of tuition costs. And those costs have become a problem. Student debt ballooned by 20% since the end of 2011 to reach almost $1.2 trillion in May of 2013, according to the Consumer Financial Protection Bureau.

But state lawmakers across the country are now looking for ways to address the problem of crushing student loans.

"There's more of a focus now because the debt issue and the issue of affordability have become so pronounced," said Mark Smith, higher education policy analyst for the National Education Association.

Of course, most bills introduced at the beginning of state legislative sessions never become law. But here's a look five measures various state legislatures are considering to help lower graduates' debt.

1. 'Pay It Forward'

Lawmakers in more than 20 states have filed bills that would put states on a path to scrapping college tuition altogether, said Dustin Weeden, policy specialist for the National Conference of State Legislatures. Instead of taking out a loan to pay tuition, students would graduate debt free, and then pay a set percentage of their income, probably in the range of 1% to 4%, to the college for a set period of time, like a tax. It's a compelling idea, ensuring that no student will owe more for their education than they can afford and proposals are spreading like wildfire across state capitols.

But passage of the program, dubbed "Pay it Forward," on any large scale is far from certain. Most of the bills that have been introduced would only authorize studies into the income-based payment scheme. And the financial barriers to implementing the program on a large scale are significant: universities would face a payment lag during the initial switch and less predictable funding long-term.