District of Columbia Tuition Assistance Grant Program
Introduction
The District of Columbia Tuition Assistance Grant (DCTAG) program was established in 1999 to subsidize the tuition and fees of D.C. high school graduates that attend public institutions outside of the capital. It provided a subsidy to graduates equal to the difference between the in-state and out-of-state tuition rate, giving DC residents de-facto in-state status at eligible public institutions. The maximum benefit that students receive is $10,000 per year enrolled ($50,000 over their lifetime). The program initially had eligibility to public institutions in Virginia and Maryland in the first year, but later expanded to include all public postsecondary institutions nationwide. The program also allowed for subsidies for students to attend private colleges in DC or historically black colleges and universities, with a maximum benefit of $2,500 per year ($12,500 over their lifetime). To be eligible, for the program, individuals must have been DC residents for at least 12 months before college enrollment, graduated from high school (or obtained a GED) after 1997, and must begin undergraduate studies within three years of graduation.
Abraham and Clark (2006) study the impact of the DCTAG program on the enrollment decisions of DC residents. They provide a difference-in-difference estimate that examines how college enrollment of DC residents compares to enrollment by residents in other states. They examine changes in enrollment around the rollout of the program (1998-2002). Hendren and Sprung-Keyser (2020) translate estimates from Abraham and Clark (2006) to construct an MVPF of this tuition support program. To do so, they use these estimates to project the impact of the policy on lifetime earnings and tax revenue. They utilize estimates from Zimmerman (2014) on the impact attendance of college on earnings and assume that the returns to college are constant in percentage terms over the lifecycle.
MVPF = 23.0
Net Cost
Hendren and Sprung-Keyser (2020) estimate the direct program costs based on the average subsidy received and an assumed number of years of enrollment. This yields a value of $1176. Increases in the years of education produce additional costs for the government through the costs of college. However, the costs of college vary by state and the DCTAG-eligible residents attended postsecondary programs across various states. Hendren and Sprung-Keyser (2020) produce a measure of the average costs of college and average tuition by using the tabulation of fall enrollment for DC high school graduates by school. Following the approach of Zimmerman (2014), Hendren and Sprung-Keyser (2020) calculate the governments costs per full time enrollee for each state in which a DC resident enrolled in public university based on data from the Delta Cost Project. The supplemental costs of enrollment are $1,298. Hendren and Sprung-Keyser (2020) also incorporate the reduction in government costs due to lifetime higher earnings by college enrollees. The impact of the program on earnings is outlined in the Willingness to Pay section below. Those earnings gains are translated into government savings using a 18.9% tax and transfer rate, based on estimates from the Congressional Budget Office. The earnings gains result in $2,084 in additional government revenue, causing the net cost of the program to fall to $390.
Willingness to Pay
To calculate the willingness to pay, Hendren and Sprung-Keyser (2020) start with Abraham and Clark (2006) estimates for the impact of the program on college enrollment. Abraham and Clark (2006) find enrollment amongst DC residents rose 8.9% relative to individuals in comparison states. Hendren and Sprung-Keyser (2020) transform these enrollment effects into additional years of schooling and then use estimates from Zimmerman (2014) to estimate the impact on lifetime earnings. In their baseline specification, Hendren and Sprung-Keyser (2020) assume that each enrollee leads to two additional years of schooling. They use the results from Zimmerman to estimate a decline in earnings in years 1-7 after enrollment and then an increase in earnings over the rest of the lifecycle. Zimmerman (2014) observes earnings gains in years 8-14 and Hendren and Sprung-Keyser (2020) project those gains over the rest of the lifecycle For the fraction of individuals induced to enroll, Hendren and Sprung-Keyser (2020) subtract off their private contribution to schooling expenditures, determined by the cost in each state. The projected post-tax earnings gains provide the willingness to pay for all individuals induced to change their behavior and receive more education as a result of the grants. They calculate total willingness to pay by summing those earnings gains with the simple value of the transfer for the fraction of individuals not induced to change their behavior. The resulting WTP from this procedure is $8,959.
MVPF Summary
Combining these estimates, Hendren and Sprung-Keyser (2020) get an MVPF of 22.98. To obtain the confidence intervals, they bootstrap the enrollment, earning and tax revenue outcomes. This leads to a 95% confidence interval of [1.11,\infty].
Hendren and Sprung-Keyser (2020) also consider a specification where the scholarship is valued at the cost of the transfer rather than based on the change in long-term earnings. This conservative method for calculating willingness to pay ignores any effect from increases in earnings. Instead, it applies the envelope theorem to those induced to get more schooling and assumes they are indifferent to the expenditure. All those who do not change their behavior as a result of the scholarship value it as a dollar-for-dollar transfer. The resulting MVPF for this alternate specification is 3.02 with a 95% confidence interval of [0.59,\infty].
References
Abraham, Katharine G. and Melissa A. Clark (2006). “Financial Aid and Students’ College Decisions: Evidence from the District of Columbia Tuition Assistance Grant Program.” The Journal of Human Resources, 41(3), 578-610. http://www.jstor.org/stable/40057270
Hendren, Nathaniel and Ben Sprung-Keyser (2020). “A Unified Welfare Analysis of Government Policies.” The Quarterly Journal of Economics, 135(3): 1209–1318. DOI: https://doi.org/10.1093/qje/qjaa006
Zimmerman, Seth D. (2014). “The Returns to College Admission for Academically Marginal Students.” Journal of Labor Economics, 32(4), 711-754. DOI: https://doi.org/10.1086/676661
Policy Features
- Category
- Education
- Sub-Category
- College Child
- Beneficiary Type(s)
- Children and Youth, College enrollees, Students
- Average Age
- 20
- Average Income
- 22977
- Country of Implementation
- United States
- Year of Implementation
- 1999
- Empirical Method
- Difference in Differences
- Research Type
- Secondary
- Peer Reviewed
- Yes
- MVPF Publication Link
- academic.oup.com/qje/article/135/3/1209/5781614