Her proposal includes tuition-free enrollment in public, in-state colleges and universities for families of four making up to $85,000. The income benchmark would increase over four years to $125,000 -- covering about 80% of U.S. families.
Clinton's campaign, by updating her plan, hopes to win over Sanders supporters, even while the Vermont senator declines to drop out of the presidential race.
Sanders lauded Clinton's plan in a news conference Wednesday in Washington, saying it represents the best principles that both Democrats advocated.
"This proposal combines some of the strongest ideas which she brought forth during the campaign with some of the principals that I brought forth," he said.
Sanders told CNN's Wolf Blitzer that he is working with Clinton's campaign on further proposals that would blend the ideas both have advocated. "We are working on other ideas, as well," he said.
Clinton's also proposing a three-month moratorium on all student loan repayment on federal loans, allowing students a window to consolidate their loans with the Department of Education. And Clinton is pushing a year-round Pell Grant that would cover summer tuition.
It increases the cost of Clinton's original college affordability plan, which was $350 billion and paid for by limiting tax deductions and expenditures for the wealthy to 28%.
To foot the bill for her new plan, Clinton proposes "closing additional high-income tax loopholes -- focusing on loopholes available especially to Wall Street money managers, like hedge funds and private equity firms," an aide said.
When Clinton and Sanders met in Washington, D.C. last month, college affordability was an issue they focused on, according to aides. The two spoke about how to promote the issue in the party's platform and ensure it remains at the core of the Democratic Party.
"We will continue to ensure that Hillary's proposals don't add to the debt over time, just as she has throughout this campaign," the aide said.
Education was a key difference between Clinton and Sanders in the Democratic primary. Clinton regularly said that her education plan was "more comprehensive" than Sanders', a fact that that the Vermont senator vociferously pushed back on.
Clinton had argued that Sanders' education plan, while admirable, would be difficult to implement.
"I think my plan is ... more comprehensive because I am aiming at getting costs down, not just putting more money in the system so costs keep rising," Clinton said in 2015.