Driven by economic and educational imperatives, public policymakers, higher education leaders, and philanthropic and advocacy groups are mobilizing aggressive national and state campaigns to bolster college completion. Campaigns to improve student success are particularly concerned about the performance of our nation’s community colleges, where graduation rates have remained stubbornly low. In response to this challenge, state governments are testing the power of several policy levers to change individual and institutional behaviors in ways that increase and accelerate college completion. One of these is the formula used to allocate public funding to institutions.

Recently, several states have experimented with new performance-based funding models that allocate some percentage of state support on the basis of institutional progress in improving student retention, progression, or completion of credentials, not just on enrollment levels. 

This brief presents a set of JFF-produced tools that can help states design performance-based funding systems that can influence student and institutional behavior, avoid unintended consequences, and withstand shifts in political and economic climates. These “Performance Funding 2.0” tools are based primarily on the experience of states participating in Achieving the Dream and the Developmental Education Initiative that have moved toward a new performance funding model in recent years.