I get asked all the time how I organize my papers that come in and out to grade. I've done a number of things over the years, but this is probably my favorite system ever now.
Over the summer I hosted a Thirty-One bag party and got all kinds of cool stuff from it. One of the things I got was a Fold-N-File. I absolutely love this thing. I think I'm more organized than I was before because of this system.
Here's what it looks like in general (taken from the Thirty-One Catalog):
Inside the Fold-N-File, I have a different hanging folder for each class that I teach.
I love this. If you've always been trying to find a way to handle the paper clutter, this is definitely something to invest in. It will save from the piles of papers spread out everywhere.