Put simply, yes, states should do this (and MI specifically should, given their enormous brain drain). A good friend of mine went to grad school at UNC, and I know that when she was accepted they gave her the opportunity to pay in state tuition (even though she's from MI), if she agreed to sign a letter saying that she would live in NC for a certain period after (I think it was around 5 years).

Recently, my employer gave me a lump sum payment to buy a house, with the condition that I have to continue to live in that house and work for the company for 5 years, otherwise I owe them plus interest. I see no reason why the state shouldn't similarly incentivize its residents to stay put and contribute to the economy, especially given how much the state has invested in each student over the years. It makes sense for the state to want to recoup part of its investment. Some kind of tuition waver for a promise of staying put would be a great way for the state to hedge some of its investment. Despite the economy as a whole, the job market for college grads is fine. There's no doubt these engineers, nurses, business people or whomever else are going to contribute lots to the economy lots more than a $5, $10 or even $20k tuition forgiveness. That brings up an interesting aside, however. If a program like this were implemented, should all students be treated equally? An engineer is more likely to make a better living and thus add more to the economy than an artist, so should they be more highly incentivized to stay? My gut says no. Firstly, I know several liberal arts degree recipients who have very successful careers, even though most struggled out of the gate. Secondly, and this is very true of Detroit, artists are value added to the economy in more ways than direct tax payments to the state. The only reason Detroit's downtown population is growing right now is because the artists moved in first and made it more desirable. The businesses are following now. That's awesome, but they owe a lot of this new energy to the pioneers who went there first.