Michigan State is a great university with an excellent reputation for engineering. I’m just surprised he was offered this prestigious (and rare) scholarship but not honors, you may want to check or email about it.
As you can see the discussion revolves around direct admit v. Non direct.
Direct admit means your child doesn’t have to “prove himself” again. He can stumble and remain in the college of engineering.
At Michigan State, he would have to do well since there’s a second review to decide whether he can officially pursue his major.
(tamu is NOT recommended bc that process is so competitive it is actively unpleasant.)
If you’re confident he’ll do well then it’s no problem.
As to whether it’s better to be average at UIUC v. Excellent at MSU, the answer is excellent at MSU. The best opportunities go to the best students and the US is relatively equalitarian when it comes to engineering as long as the program is ABET accreditated.
Another thing I’d check into: how helpful is the internship and/or international office in helping international students with internships&paperwork, are they used to their situation, steering them to appropriate companies (ie., nothign Defense or aerospace related)? Summer internships - to be secured Fall junior year for the following summer at the latest- are essential to be granted OPT (27 months to practice what you learned). Btw internships can be anywhere in the US so having a bit of breathing room money-wise will help your son in case the internship is in a high cost of living area such as Boston, NYC or CA.