Financial Aid and Students’ College Decisions
Evidence from the District of Columbia Tuition Assistance Grant Program
Katharine G. Abraham Melissa A. Clark
a b s t r a c t
The District of Columbia Tuition Assistance Grant Program DCTAG, insti- tuted in 1999, allows D.C. 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 D.C.
residents to estimate the effects of price on college application and enrollment decisions. We find that DCTAG increased the likelihood that students applied
to eligible institutions and markedly increased college enrollment rates among recent high school graduates. Enrollments increased primarily at less selective
colleges and universities, with no decrease at more selective schools.
I. Introduction
How college costs influence students’ decisions about whether and where to attend is a question of considerable importance to policymakers, university
Katharine Abraham is Professor of Survey Methodology and Adjunct Professor of Economics at the University of Maryland. Melissa Clark is an Economist at Mathematica Policy Research. The authors
thank Orley Ashenfelter, Alan Krueger, David Linsenmeier, Cecilia Rouse, two anonymous referees, and seminar participants at the University of Notre Dame, the Federal Reserve Bank of New York, and the
labor lunch at Princeton University for helpful comments and suggestions. Ellen Sawtell of The College Board and Diane Dickerson-Hayes of the University of the District of Columbia provided assistance with
data. The SAT data used in this paper are proprietary and were obtained from the College Board under a license with Princeton University. Researchers wishing to obtain these data may apply for a license with
the College Board, under the guidelines provided on their website: http:www.collegeboard.comprod_ downloadsresearchRDGuideforReleaseData.pdf. The authors are willing to provide guidance on using
these data to anyone who may choose to pursue them. The other data used in this article can be obtained beginning January 2007 through December 2010 from Melissa Clark at Mathematica Policy Research,
P.O. Box 2393, Princeton, NJ 08543 or mclarkmathematica-mpr.com. [Submitted August 2005; accepted January 2006]
ISSN 022-166X E-ISSN 1548-8004 © 2006 by the Board of Regents of the University of Wisconsin System
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administrators, and education researchers alike. It is difficult, however, to determine the sensitivity of students’ application and enrollment decisions to the prices they face
at various institutions. The amount of financial aid available to students typically is correlated with individual characteristics that may have an independent influence on
their college decisions. Similarly, the price charged for attending particular colleges and universities is correlated with other institutional characteristics that may make
them more or less attractive to potential enrollees. Drawing valid conclusions about the effect of college costs on students’ decisions requires an exogenous source of vari-
ation in prices. In this paper, we utilize one such source of variation, the introduction of the District of Columbia Tuition Assistance Grant DCTAG program, to examine
the effect of a sharp decline in public college and university prices faced by D.C. res- idents on their college application and enrollment decisions.
The DCTAG program, established in 1999, provides a substantial subsidy for D.C. residents to attend public colleges and universities outside the District. Specifically,
the program allows qualifying D.C. residents to attend public colleges and universi- ties in other states at the considerably lower “in-state” tuition rates of these institu-
tions. This benefit is subject to an annual cap of 10,000 and a lifetime cap of 50,000 per student. District of Columbia residents attending private institutions in the
Washington, D.C. metropolitan area or designated historically black private colleges and universities are eligible for a smaller subsidy of 2,500 per year.
In this paper, we examine the effect of the DCTAG program on the college appli- cation and enrollment decisions of D.C. residents. We ask whether there are dis-
cernible effects of the DCTAG program on the likelihood that a D.C. resident who graduates from high school will apply to college or actually enroll as a college fresh-
man, and also whether the program has affected the type of colleges that D.C. high school graduates apply to or attend. We use these results to draw conclusions regard-
ing the broader question of the effects of financial aid and the price of college on stu- dents’ college application and enrollment decisions.
Our work contributes to a growing literature on the effects of college price on stu- dents’ enrollment decisions. Much of the early research in this area failed to address
the potential endogeneity of college prices faced by particular groups of students, but a handful of recent studies have exploited plausibly exogenous changes in the price of
college faced by specific groups of students to study the effects of college price on college attendance.
1
These studies have provided important evidence of the effects of college price on enrollment decisions, but since most have exploited sources of vari-
ation in college price that affect a specific subset of students, findings may not be eas- ily generalized to the broader U.S. population. For instance, Dynarski’s 2000 study
of Georgia’s HOPE scholarship program and Kane’s 2003 study of the Cal Grant financial aid program exploit variation in college price due to merit-based financial
aid, and findings are most appropriately generalized to higher performing students. Dynarski 2003 examines the 1983 elimination of the Social Security student bene-
fit program, which had provided generous stipends to children of deceased parents aged 18 to 22 who were enrolled as full-time college students. Linsenmeier, Rosen,
Abraham and Clark
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1. See Leslie and Brinkman 1988 for a review of the early literature and Dynarski 2002 for an excellent overview of more recent studies.
and Rouse 2002 and Van der Klaauw 2002 each examine the effects of changes in financial aid policies at a particular university to see how these changes affect enroll-
ments at that institution. In another study of the DCTAG program, Kane 2004 examines the program’s
overall effects on college enrollments, and also uses information about where students who fill out the Free Application for Federal Student Aid FAFSA chose to have that
form sent to learn about DCTAG’s effects on college applications. A limitation of this approach is that many students do not complete the FAFSA.
2
Therefore, although interesting in its own right, analysis of FAFSA data is likely to paint an incomplete—
and potentially distorted—picture of how the DCTAG program has affected college applications among all students eligible for the program.
Our study contributes to the existing literature in three main ways. First, we are able to examine the effects of college price on students from a broad socioeconomic spec-
trum. Unlike most of the financial aid programs evaluated in previous work, DCTAG is neither need-based nor merit-based nor targeted at a specific population such as
children of deceased fathers, but is available to any D.C. resident meeting basic eli- gibility criteria, a group that is socio-economically diverse. Second, our study is one
of the first that we know of to examine the effects of college price on college appli- cations
as well as college attendance. In contrast to the FAFSA data analyzed by Kane 2004, we believe the SAT data we analyze provide a more comprehensive pic-
ture of DCTAG’s effects on college applications. Moreover, we are able to examine how the program affects application decisions among a variety of subgroups of inter-
est, including black versus white students, public versus private high school gradu- ates, and low versus high performing students. Third, our study examines how college
price affects the selectivity of the schools chosen by students. The policy implications of an increase in enrollments at less selective public universities due to DCTAG, for
example, would be quite different if the increase were due to a reduction in enroll- ments at top-tier private universities than if it were due to an increase in enrollments
among students who otherwise would have attended two-year colleges or not gone on to college at all. Our analysis of DCTAG’s effects on the selectivity of colleges
applied to and attended provides valuable insight into the mechanisms through which college price affects college applications and enrollments.
We find that students are price-sensitive in their college application and enrollment decisions. By lowering the price of eligible public institutions, DCTAG increased the
probability that students applied to, and enrolled at, these institutions. There is no evi- dence that DCTAG led students who would have otherwise attended more selective
institutions to attend less selective schools eligible for the grant. Instead, the large
2. According to American Council on Education 2004, 50 percent of undergraduates enrolled for credit at eligible two-year or four-year institutions during the 1999–2000 academic year failed to complete a FAFSA.
Full-time students are more likely than part-time students to fill out the form, but a full third of full-time undergraduates at public four-year colleges and more than 45 percent of those at public two-year colleges
did not complete a FAFSA. Even among dependent students with family incomes under 20,000 per year, more than 20 percent did not complete a FAFSA, and noncompletion rates rise sharply with family income.
In the District of Columbia in 1999, among families with children younger than 18, median family income was 33,757, and 91 percent of families had incomes greater than 20,000 U.S. Census Bureau, 2005, sug-
gesting that we can expect a significant share of D.C. high school graduates who go on to college not to have completed the FAFSA.
The Journal of Human Resources 580
growth in enrollments at eligible public institutions appears to have been fueled by increasing attendance rates among students who would not otherwise have gone to
college. Overall, we find DCTAG increased the percentage of D.C. residents of high school graduation age who enrolled as college freshmen by roughly 8.9 percentage
points or 3.6 percentage points for every 1,000 of aid.
II. Overview of the DCTAG Program
