St. Mary's College pounced as soon as President Clinton signed legislation giving District students in-state tuition privileges at Maryland and Virginia colleges.

Officials at the tiny public college in Southern Maryland immediately activated a targeted mass mailing to about 600 city high school seniors with top-notch test scores. Along with the usual glossy brochures extolling the virtues of the picturesque waterfront campus they enclosed a more blunt appeal:

"District Students, Welcome to In-State Tuition Rates" reads the cover sheet, decorated with a cartoon wad of cash.

The landmark $17 million federal program, approved by Congress this month and by the president Friday, was championed as a way to expand college choices for students in the District and encourage more families of all income levels to consider living in the city.

And for colleges that had been priced out of many D.C. students' budgets, the program opens a new front in the never-ending competition for the best students, particularly black students.

"There's a whole new market that has just opened up to us, and you don't have to fly to Iowa to find it," said Jim Antonio, St. Mary's dean of admissions and financial aid.

Colleges stand to benefit financially as well. While D.C. students will pay the lower tuition rates enjoyed by in-state students, the colleges will receive the full out-of-state rate--with the federal government making up the difference.

The program is open to all D.C. students who enter college within three years of high school graduation, longer if they first serve in the military, Peace Corps or AmeriCorps. They must be admitted to a Maryland or Virginia public institution under the normal application process for out-of-state students.

Once enrolled, students will receive grants of up to $10,000 a year--no more than $50,000 total--to subsidize their out-of-state expenses. The program also extends grants of $2,500 a year to city students who are admitted to private institutions in the immediate D.C. area.

Some college officials say they have long yearned to draw more District students but have made only modest recruiting efforts because they believe many city residents can't afford the tuition. And while the District's best black students have long been wooed by the Ivy League with promises of scholarships, the new program puts local public colleges back in the running for those high-caliber students.

Marcelle Heerschap, dean of admissions for George Mason University, says the Fairfax County school receives many applications from the District, but "we get very few students to enroll." Anecdotal evidence suggests that's because of the tuition differential--Virginians pay $3,756 a year at George Mason, while out-of-staters are charged $12,516.

George Mason officials intensified their recruiting trips to the District this year and talked up the proposed tuition program to potential students as it moved through Congress this fall. Now the school is trying to identify promising ninth- and 10th-graders from the District to include in summer programs for prospective applicants.

At the College of William and Mary, a public liberal arts school in Williamsburg, officials are writing all D.C. seniors who have shown interest in the school to alert them to the new program.

"Now they can look at us with that new price tag in mind," said Virginia Carey, dean of admissions. The college is even promising to extend the December application deadlines for District students.

Other colleges are moving more slowly. While many institutions say they will likely double their efforts in the District in coming years, officials say it's too late to make a serious play for seniors this year.

Officials at Maryland's and Virginia's flagship institutions--the University of Virginia in Charlottesville and the University of Maryland in College Park--say they will remain more focused on serving their in-state clientele.

Yet for St. Mary's College, the prospect of drawing students from outside Maryland is tantalizing.

"This is a rural campus, but I want to get some urban students here," Antonio said. "I think they bring a certain perspective that oftentimes we may not have."

St. Mary's hopes to organize special recruitment receptions for D.C. students this year. Next week, school officials plan to videotape a half-hour show on the admissions process for the District public schools' cable station.

"We should be the proponents of trying to get the word out," Antonio said. "I'm hoping we're getting there first."