While most students have the summer off, Don Shepherd is getting ready for the fall. At Mass Bay Community College in Wellesley, Shepherd takes the elevator down to the basement.

He digs through cardboard boxes, stocking up on tote bags and other swag for incoming students.

“We’re expecting about 73 that are actually scheduled but then you always have the walk-ins,” Shepherd said.

As an orientation leader, Shepherd seems well adjusted here on campus, although he’s what higher education experts would call a non-traditional student. He graduated from high school more than 20 years ago before serving in the Marine Corps and National Guard.

“I’m using the voc/rehab program, because it’s been so long since I’ve been to school.” he said.

The military suggested Shepherd attend a two-year program at a community college. Then, two years ago, he and his 4-year-old son found themselves homeless, living in a shelter outside of Boston.

Click the community colleges on the map to see how they're affected by performance based funding:

“I don’t want to go back to that so that’s why I’m here to better myself and get back on track,” he said.

For years, state funding for higher ed in Massachusetts largely followed enrollment. If a school enrolled more students, it received more state money. Now, under the state’s new higher ed plan, if Mass Bay and other community colleges manage to retain students like Shepherd – keeping them on track to graduate, earn a credit or even find a job – these schools will see their funding increase even more.

That’s a solid return on investment for taxpayers at a time of dwindling public resources, said Richard Kazis, of the non-profit Jobs for the Future, which tracks higher ed financing across the country.

“For every scarce public dollar, you want to get something back for the state," Kazis said.

"And you don’t get much back when somebody starts, and after their first semester they quit. They might have debt. And then they’re back out on the street with little gain in terms of their productivity or their ability to contribute to the regional economy.”

In the wake of the recession, the wave of performance-based funding is cresting across the country: 12 states already link higher ed funding to performance; four states, including Massachusetts, are preparing to move in that direction, and another 20 are considering it. That’s according to the National Conferences of State Legislatures

But will changing the way public higher ed institutions are funded – from enrollment to college or credit completion – work? Mass Bay Community College President John O’Donnell is optimistic that it will.

“The accountability movement is sweeping the nation and I’m very glad it has come to Massachusetts,” O'Donnell said.

Under the new plan, Mass Bay will see a 16 percent spike in state funding next year. The college will invest that additional money in high cost programs such as nursing and science with the goal of better aligning programs with key industries in the state.

“What we’re setting up here is an educational ladder potentially for every citizen," he said. ”I fully believe there is a skills gap. And it’s my job and it’s public higher education’s job to lessen that gap.”

If community colleges don’t train students to thrive in the new economy, higher ed officials say their funding ought to be cut.

Katy Abel, of the Massachusetts Department of Higher Education, which designed the new performance-based model, says the old model was broken because it didn’t account for growth in student populations at the state’s community colleges.

“ … which was all over the map if you look at the 15 colleges," Abel said. "The funding didn’t make sense on that basis.”

The public higher education system in Massachusetts has grown more than 20 percent in the past decade. Since the recession, it’s played a more important role in producing the state’s future workforce. Which raises the question: should Massachusetts extend its performance-based spending beyond community colleges to the entire UMass system?

“Providing incentives for public universities to perform at a high level is a great way to get the type of performance you’re looking for,” said UMass Lowell Chancellor Marty Meehan, as he thumbed through his university’s performance report card. Meehan pointed out a graduation rate of 54 percent, and a retention rate of 81 percent.

He’s not waiting to measure results like community colleges will now have to do. He introduced the report card several years ago. The idea was to hold professors and deans accountable. After some pushback, they agreed to it. At a time when some students are questioning the value of a degree, Meehan said it’s important to measure results.

“Families are beginning to look at a college education much the way they’d look at purchasing a home or purchasing a car, and I think UMass has to be ready for that,” Meehan said.

There are some quiet critics who say higher ed institutions will try to “game” the performance-based funding scheme by fudging their graduation and success rates.

But today, with student tuition and loan debt soaring, no one is questioning the need to restructure our higher ed system so that student outcomes are more important than institutional bottom lines.