Questions and Answers Regarding Financial Aid

What is the purpose of the M-PACT program?
The program is intended to make a U-M education more affordable by increasing grants and reducing loans for Michigan resident undergraduate students from low- and moderate-income families.

Why are you creating a new financial aid program?
The University of Michigan continues to meet the full financial need of all resident undergraduates. Even so, as state funding has declined and tuition has made up a rising share of the cost of attendance, the amount of student loan indebtedness has been on the rise. M-PACT replaces loans dollar-for-dollar with grants, which do not have to be repaid. In addition, many students and families do not understand the significant amount of financial aid that is available, and we hope this program will raise awareness.

When will these new grants be available?
The grants will be available for in-state undergraduate students attending the University of Michigan's Ann Arbor campus beginning in Fall 2005.

Will the program be open to all undergraduates, or just first-year students?
The program is open to all income-eligible Michigan resident undergraduates at U-M's Ann Arbor campus.

Will the program be open to students at the Flint and Dearborn campuses?
M-PACT is specifically for resident undergraduates at the Ann Arbor campus. The Flint and Dearborn campuses independently set tuition and award financial aid.

How can I apply for one of the new grants?
You do not need to do anything differently to apply for an M-PACT grant, other than the normal process used to apply for all need-based financial aid. If you have not done so already, you should complete the FAFSA (Free application for Federal Student Aid) as soon as possible by visiting The U-M Office of Financial Aid will notify you if you need to complete any additional financial aid forms; University forms must be submitted no later than May 31. Additional information is available from the Office of Financial Aid at

How many students does this program reach?
Considering this year's financial aid awards, we estimate that 2,900 in-state undergraduate students at the University of Michigan's Ann Arbor campus will have M-PACT grants added to their financial aid package in Fall 2005. However, the number of students receiving the grants may grow over time as Michigan's high-achieving high school students realize that U-M is an affordable option for them.

Why do you say the size of the M-PACT program may grow?
Our estimate of 2,900 students eligible for M-PACT grants is based upon the income distribution of our current student population. We believe that many low- and moderate-income students have a misperception that they cannot afford to attend the University of Michigan. We hope this program will encourage more of those students to apply to the University and be admitted. If that happens, we may need to increase the size of the program to assist these new students.

How much will the University invest in the M-PACT grants?
We will spend at least $3 million per year in additional grants for in-state undergraduate students attending the University of Michigan.

What is the source of funding for this program?
The president will provide seed money for the first three years of the program from private gifts to the University. Simultaneously, she announced a focused fundraising effort as part of The Michigan Difference campaign to raise at least $60 million in endowment funding to support the M-PACT grants into the future.

How will you pay for the program after the initial three-year commitment?
We believe our alumni and friends will enthusiastically support this program and step up to create the endowment needed to support it over the long term.

Since U-M already meets the full financial need of Michigan residents, what does this program add?
M-PACT reduces the amount of loans that students need to cover the full cost of their attendance at the University. It increases to $12,200 per year the total need-based grant for students at the lowest income level—those from families whose financial circumstances make the students eligible for a full Pell grant. This means that grants and work-study, which do not have to be repaid, will cover more than 80% of the total cost of attendance. Student often receive additional, merit-based scholarships which further reduce their loan amounts.

Why haven't you completely eliminated loans for low-income students?
Loans are not inappropriate for funding part of a student's college education. Those who complete a college degree have a far higher earning potential than individuals with only a high school diploma—about a million dollars more over one's lifetime. The cost of attending college represents an investment in each person's future success. However, for low- and moderate-income families, we want to reduce the loan burden by increasing the amount of grant aid we are able to provide.

How much has student loan indebtedness increased?
Students at the lowest income level, whose families cannot afford to contribute any dollars toward the cost of college, received about $2,000 in loans in 1999-2000. That meant loans made up about 15% of their total financial aid package. This year, those students receive about $5,000 in loans, and those loans represent nearly 30% of the total financial aid package.

Why are you concerned about loan indebtedness?
Our greatest concern is that the prospect of taking on debt to pay for college can discourage many students from participating, especially those from low-income families or families where the student is the first to attend college. Research has found that these families are much less comfortable borrowing money to attend college, and may not feel they have the resources to repay the debt.

How will you determine which students get $500, $1,000 or $1,500 grants?
It will depend upon the student's financial need. The grants will be awarded on a sliding scale, with the full $1,500 grant going to students whose family circumstances make them eligible for a full Pell grant. Students whose financial need places them just outside Pell eligibility will get a $500 grant.

What income level does it take to be eligible for a Pell grant?
It depends upon each family's individual circumstances. For example, a family of six with two children in college simultaneously will have more financial need than another family with the same income that has only a single child. Depending upon their financial need, some students will be eligible for the full Pell grant (currently $4,050 per year), while others may qualify for a partial Pell grant. Students who are not eligible for Pell grants may still receive other types of financial aid.

How will my financial need be determined?
Every student who wishes to be considered for need-based financial aid must complete the FAFSA—Free Application for Federal Student Aid. The FAFSA information is provided to the University, which allows us to determine the student's financial need. "Need" is defined as the total cost of attendance—tuition, room and board, books, and related expenses—minus the family's expected contribution.

What is "expected family contribution"?
Expected family contribution is the amount the student and his or her family are expected to pay toward the cost of attending college. It is determined according to a federal formula that considers family size, income, assets, and other variables.

How far up the income scale will the M-PACT program reach?
Although the new program will bring the greatest amount of assistance to families at the lowest end of the income scale, M-PACT also is designed to support students whose families may earn slightly more than the amount needed to qualify for a Pell grant—typically in the range of $50,000 to $70,000 per year.

Why provide additional aid for moderate-income families?
Some students from moderate-income families who used to receive a partial Pell grant may lose these grants under new federal eligibility rules. In addition, we recognize that there are many moderate-income families who are not eligible for Pell grants, but who still struggle to meet college expenses. We want to assist those students and families as well.

What is the distribution of family income levels among U-M's current undergraduate enrollment?
We do not have any comprehensive measure of the family income of our students. However, our incoming first-year students participate in a survey during summer orientation, and among the many questions they are asked to estimate their family income. According to the most recent survey of freshmen in 2004, about 14% reported family incomes below $50,000. About 31% reported family incomes between $50,000 and $100,000, and about 55% reported family incomes greater than $100,000. It is important to recognize that these are student estimates, and may not reflect their actual family income.

Why is this program only for in-state students?
Out-of-state students are a very important part of our diverse learning community, and bring with them a multitude of experiences and talents that add to the quality of our educational environment. However, as a public university in the state of Michigan, our first obligation is to in-state undergraduate students.

What will you do for out-of-state students?
The University already provides significant financial aid for out-of-state students. Even so, because their tuition is so much greater, their corresponding financial need is greater. We will continue our efforts to raise funds from private donors to support scholarships for both in-state and out-of-state undergraduate students.

How much financial aid does the University already provide?
With the addition of M-PACT, the total grant aid from all sources given to U-M resident undergraduates at the Ann Arbor campus will be more than $55 million a year. Of that total, $33 million is aid flowing directly from the University's own resources. We believe that amount represents one of the largest financial aid investments of any public university.

What are the various sources of financial aid?
Financial aid comes in the form of grants, work-study, and loans. In addition to grants paid for directly by the University, grants may come from the federal government, the state of Michigan, or from private individuals or organizations. Grants may be need-based or merit-based.

What's the difference between need-based and merit-based aid?
Need-based aid is awarded upon the basis of the student's financial need and the family's ability to pay for the cost of attending college. Merit-based aid is awarded on the basis of academic achievement and other criteria that are not related to the student's financial circumstances.

What is the difference between grants and scholarships?
Grants and scholarships are the same thing—financial assistance to students that does not need to be repaid.

What is work-study?
Work-study is a federally supported program that is awarded on the basis of financial need. Students on work-study are employed in campus jobs, with the federal government subsidizing a large proportion of their wages. Like grants, work-study assistance does not need to be repaid.

How is the University able to contribute such a large amount of its own resources to financial aid?
Our budgeting process always includes putting our resources into the highest priority activities. We have long made a significant institutional commitment to financial aid, because one of our major priorities is to ensure that no Michigan resident undergraduate student admitted to the University will be discouraged from attending solely because of financial barriers.

Why does financial aid typically exceed the amount of tuition?
Financial aid is based upon the complete cost of attendance, which includes tuition, room and board, books, and related expenses. For an incoming resident freshman in the College of Literature, Science and the Arts this year, tuition was $8,200 and other costs totaled $10,000. The total cost of attendance was $18,200, and that is the figure used to develop our financial aid packages.

My tuition is higher than $8,200—how will this affect my financial aid?
Our undergraduate programs have a range of tuition levels. The figure $8,200 represents the 2004-05 tuition for a first-year student in the College of Literature, Science and the Arts. For students whose tuition is higher than $8,200, the total cost of attendance will be higher and the financial aid package will be adjusted accordingly. Depending upon their financial need, these students will have a differing mix of grants, loans and work-study.

I'm an undergraduate from the State of Michigan—does this new program mean I'm guaranteed to get financial aid?
M-PACT grants are available to all U-M resident undergraduates who meet the income eligibility guidelines. That means many of our students whose family incomes are higher and who have less financial need will not receive M-PACT grants. They may, however, qualify for other types of financial aid.

What percentage of U-M resident undergraduates get financial aid?
About 36% of resident undergraduate students at the Ann Arbor campus receive need-based aid, including grants, loans and work-study. About two-thirds of resident undergraduates receive financial aid of all types, including merit-based awards, grants, loans and work-study.

How much has tuition gone up over the years?
Over the past six years, tuition for Michigan resident undergraduates has increased an average of 4.9% per year.

How much has U-M financial aid grown over the years in comparison to tuition?
The University has committed to increase its institutional investment in financial aid at the same or greater rate than increases in tuition. Over the past six years, centrally budgeted financial aid for the Ann Arbor campus has grown by an average of 5.3% per year.

Why has tuition increased?
State funding and tuition are the two major components of the University's General Fund, which pays for our educational programs. There is a direct relationship between tuition increases and the level of state funding support in any given year. Forty years ago state funding covered about 70% of the cost and student tuition paid for about 30%; today those percentages are reversed.

What will tuition rates be for Fall 2005?
It is too soon to know what tuition rates will be for next year. We must learn what the level of state support will be before we can fully develop our budget. Tuition rates are normally set in July.