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This is debatable. Michigan was not the #1 ranked team. They started #5 and ended that season unranked at 9-4. USC was #1, went 11-2, won the Rose Bowl and end #3/2. Moreover, App State didn’t start its game down 23-0. It also didn’t convert a 4th and 20 on its final drive of the game, or score a TD on 4th and Goal in the last minute.
On top of that, App State made a jump from FCS to FBS soon after that Michigan game, and was a very good team that year, going on to a 13-2 record and winning the FCS championship. OTOH, Stanford went on to go 4-8.