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Can Hillary Clinton solve the student loan crisis?

Hillary Clinton
Uri Schanker | WireImage | Getty Images

Hillary Clinton plans to unveil her $350 billion plan today to alleviate student debt and make college tuition more affordable.

Since there are more than 40 million graduates in the United States who collectively owe about $1.2 trillion in debt, the student loan problem is a major theme that candidates will need to address in order to gain votes.

During a town hall meeting at Exeter High School, a public school in Exeter, New Hampshire, Clinton will outline the basic goals of her plan, which aims to give students the option of attending a public four-year college with little debt by providing students access to tuition grants and allowing them to refinance their existing loans at lower interest rates.

The plan, titled the "New College Compact," will build upon the Obama administration's policies, stressing the Democratic idea that the federal government must reverse the state cuts to higher education. Clinton also attributes the student loan crisis to the trend of states passing the cost of education at public colleges to students rather than shouldering a portion of the debt.

The main focus of Clinton's proposal is to create a state grant program that would lower tuition at public colleges and universities. States would be incentivized with funding to set tuition at a rate that students can afford without taking out loans and to keep their school's administration costs to a minimum. States that enroll a high number of low- and middle-income students would receive more money, as would those that work with schools to reduce living expenses.

The New College Compact will be funded over the course of 10 years and paid for by capping the value of itemized deductions for wealthy families at 28 percent, like those taken by high-income taxpayers for charitable contributions and mortgage interest.

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About $175 billion in grants would go to states that guarantee that students would not have to take out loans to cover tuition at four-year public colleges and universities. In return for the money, states would have to end budget cuts to increase spending over time on higher education, while also working to slow the growth of tuition, though the plan does not require states to cap it.

Other policy proposals included in the compact are ideas to simplify the application for financial aid and consolidating student loan repayment plans.

The proposal by the Democratic presidential candidate is timely, especially since senators from both sides of the aisle have challenged Clinton on this topic. Sen. Bernie Sanders (I-Vermont), who is also seeking the Democratic nomination for president, has already addressed the student loan crisis in May by announcing a bill that would cut education costs and make tuition free at all four-year public colleges and universities.

Sen. Marco Rubio (R-Florida) introduced a bipartisan student loan bill with Sen. Mark Warner (D-Virginia) in the Senate that promises to ensure less-expensive monthly payments for students and eliminate some of the burden of the 8 million student loan borrowers in default. Rubio highlighted the student loan issue in the Republican debate as a struggle that Clinton might have trouble relating to given her current financial status.

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"If I'm our nominee, how is Hillary Clinton going to lecture me about living paycheck to paycheck?" said Rubio. "I was raised paycheck to paycheck. How is she going to lecture me about student loans? I owed over $100,000 just four years ago."

The announcement of Clinton's New College Compact, which may include a response to Rubio's claims, comes at a time when voters are looking for a formidable solution that can be readily implemented.

—By Krysia Lenzo, special to