Financial incentives are an important and vastly underutilized means of improving the rate at which two-year college students transfer to four-year institutions. The increased cost of tuition at a four-year institution can be a serious financial obstacle to the transfer student. One way to alleviate this might be to provide more financial aid to students who transfer than to students who enroll directly in the four-year institution. Another method would be to offer better aid packages, involving more grants and fewer loans, to transfer students than to native students. An alternative approach would provide four-year institutions with financial incentives to recruit, enroll, and retain more two-year college transfer students. These additional funds could be channeled through enrollment-dependent funding formulas. Transfer students could be double-counted or assigned a larger cost figure. Greater weight could also be assigned to transfer students in formulas used to distribute the three federal campus-based programs: Supplemental Education Opportunity Grants, College Work Study, and Perkins Loans. Providing financial incentives to community colleges to increase the numbers of students they transfer should be feasible as well. All financial incentives need to take into account the nontraditional character of a large part of the community college population, which consists of part-time, older, working students with generally lower incomes than students in four-year schools. At present, in all institutions, 48% of traditional college students receive aid, as compared to only 33% of nontraditional students. Effective financing of transfer, whether through student or institutional aid, will require further attention to financing the entire nontraditional student population. (JSP)