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Rep. David Knezek (D-Dearborn Heights) was joined by fellow Democratic lawmakers and college students from Michigan to announce a new tuition assistance proposal that would give students interest-free loans.

(Brian Smith | MLive.com)

LANSING -- Democratic lawmakers in the Michigan Legislature put forward a proposal Tuesday to take the state's college students out of the student loan market.

The "Pay It Forward" would give in-state students interest-free loans for college in exchange for a commitment to pay back 4 percent of salaries for up to 25 years after graduation.

The plan, introduced in the House and Senate by Rep. David Knezek (D-Dearborn Heights) and Sen. Jim Ananich (D-Flint), would establish a $2 million pilot program to fund 200 students, with slots divided equally between four-year universities and community colleges. The state Treasury Department would be responsible for administering the plan, which is targeted at low- and middle-income students.

If the pilot program received more applicants than available funds, a random draw would be used to select recipients, Knezek said.

The repayment plan requires five years of payments for each year of tuition assistance a student received. That means a student who receives aid for the five-year maximum while attending college would be required to make 25 years of payments.

Payments would be equal to 4 percent of a recipient's post-graduation salary, as long as the recipient's income is above the federal poverty line, Knezek said. Depending on post-graduation income, some participants could pay more than they received over the repayment term.

The plan is similar to a proposal under consideration by Oregon's state legislature.

The Economic Opportunity Institute, a Seattle-based think tank, has promoted the concept as a way to address the cost of post-secondary education, and lawmakers in a number of other states are considering similar proposals.

Knezek's bill would also establish a minimum grade-point average for recipients to maintain, and creates a commission to monitor the program's performance and make a recommendation on whether or not the pilot program is working.

Ananich's legislation, Senate Bill 784, is identical to the House proposal.

Brian Smith is the statewide education and courts reporter for MLive. Email him at bsmith11@mlive.com or follow him on Twitter or Facebook.