As a former American student, it is not worth a family going into crushing debt. As many others have pointed out, many schools have a semester in Washington DC programs that you can take advantage of and AU even is a host to some of these programs. Another thing to consider is that AU will only continue to get more expensive as the years go by and your financial aid offer will not change.
I would suggest your daughter go to another university that your family can afford. It will be a better experience as many AU students end up not enjoying their time in college as the years go by because they are stressed by the huge amount of debt they (or their family) will be after graduation. In regards to internships, I guarantee you that any school has access to internships if students make a point of looking. While it is true that DC provides easy access, local areas also have internships such as police forces, government agencies, private companies, etc. When it comes time to apply for jobs, the CIA or FBI will not throw out her application because she didn’t go to school in DC.