I 100% agree with @bclintonk.
I grew up as a high achieving but low income student in the Detroit metro area. U of M always came off to me as being very economically elite and, to be honest, as a low income/first gen student, Michigan came off to me as much colder and less welcoming than MSU. This seems to be changing (slowly) due to some grass-roots efforts by first gen students. Many of my friends who were in the same situation I was in didn’t bother to apply because they liked MSU better for a variety of reasons.
And while it is correct that MSU doesn’t meet need, for very low income students there is the Spartan Advantage which does meet need.
Finally, even if U of M “meets need” there are many, many people with a poor understanding of how the financial aid process works and the sticker price can make them balk. That wouldn’t divert them to MSU necessarily (though it might as MSU can have better merit scholarships) but it might divert them to local directionals.
Fwiw, I was just having a conversation about why low income students don’t go to U of M with a bio professor. She said that a few years ago, some of her fellow STEM profs started personally reaching out to admitted low income/first gen students in order to encourage them to come to U of M. While that doesn’t help the application numbers, it might eventually as more and more low income/first gen kids go due to these contacts.