EAST LANSING -- Two months and a heated budget battle later, and Governor Granholm has backed off her promise to keep the Michigan Promise Scholarship alive.

She signed into law Friday a bill that kills the program that awards Michigan's college students up to $4,000 in scholarships.

"Families counted on it," says Michigan State University president Lou Anna Simon.

She said Friday she's not angry with the Governor's about-face, noting, "I think she had no choice," but she is taking action.

The college is crediting all Promise students the $500 they received under the program for the fall semester; covering part of that cost for the spring, and cutting tuition for all undergrads by $5 per credit hour in the upcoming semester.

"It's critical for our future to send a message to students that the state is committed to educating the sons and daughters of Michigan in a way that makes it competitive," Simon explains.

She says the cost will come out of stimulus funds granted to the college -- almost $8 million worth. It's a welcome gift for MSU sophomore Melanie Lang.

"I was counting on that money. I actually pay for school myself. I don't take out loans, so that's a lot of money," the Macomb Township native says.

But she's still worried about making up those funds next year -- and ticked off that the state is breaking its promise.

"That $500 is gonna hurt next year, and then the $2,000 I'm missing altogether is not gonna be great, either," Lang says.

The news for students at Lansing Community College could be worse. The college president told News 10 he's shocked by the decision, and fears students will bear the burden in the spring semester.

President Simon says the fight to keep the promise isn't quite over.

"We're hopeful that between now and the end of the year, we can work collaboratively with Governor Granholm and the legislature to find funding."