A new need-based grant program for in-state undergraduates will become available this fall to replace some loans with grant money in the financial aid packages of almost 3,000 students, University President Mary Sue Coleman announced Monday.

Known as M-PACT, the program will fund grants of $500, $1,000 and $1,500 to eligible students, allowing them to use the money to replace loans in their financial aid packages. Once the program is in effect, 80 percent of the aid in a full financial aid package will consist of grants and work-study assistance, which students do not have to pay back upon graduation.

This year, students whose families could not afford to make any contribution to their tuition costs received 30 percent of their financial aid in the form of loans. The new program would reduce that number by ten percentage points.

             The University expects the program to help 2,900 undergraduates in its first year but predicts an expansion in years to come as more low-income high school students become aware of the new grants and make the decision to apply to the University. 

            Coleman's Michigan Difference campaign - an effort to raise money through private donations in the face of state appropriations cuts - will provide seed money to get the programs on its feet. Coleman has committed $9 million in donations to fund the initial three years of the program and after that hopes to keep the money pouring in with the help of private donors, ultimately creating a $60 million endowment for M-PACT.

University Provost Paul Courant said that, despite recent cuts in state appropriations, the University remains committed to making education affordable to all students.

"We choose to invest our scarce resources in accessibility and in the lives and futures of Michigan's students," he said.

The $60-million endowment that will ensure the survival of M-PACT will be created though a massive fundraising effort, Coleman said.

The new program will also be helpful to students no longer receiving a Pell Grant under a new federal formula determining eligibility

Although M-PACT aims to help those whose families fall into the lowest income bracket and who already qualify for the highest Pell Grant of a little more than $4,000, Coleman expressed hope that the program would benefit those whose families fall into a a higher income bracket  - $50,000 to $70,000 per year - but still have trouble paying for college.

Eligibility for M-PACT grants will be determined by level of family contribution and other factors used to distribute financial aid packages. Two-thirds of University students currently receive need-based financial aid in the form of grants, loans or scholarships.