Financial Aid and Students' College Decisions: Evidence from the District of Columbia's Tuition Assistance Grant Program

The District of Columbia's Tuition Assistance Grant Program (DCTAG), instituted in 1999, allows DC residents to attend public colleges and universities throughout the country at considerably lower in-state tuition rates. We use the sharp decline in the price of public colleges and universities faced by residents of the District of Columbia under DCTAG to estimate the effects of price on students' college application and enrollment decisions. Using a sample of students from nearby large cities as a control group, we find that the number and share of DC residents applying to four-year colleges increased substantially under the program, and students were considerably more likely to apply to colleges that were eligible for the subsidy. Freshmen enrollments of DC residents also increased substantially at eligible institutions, although the effect on overall freshmen enrollments of DC residents was fairly modest, suggesting that in its first year the subsidy had more of an impact on where students chose to attend than on whether they chose to attend college at all.