Proximal goal setting has been strongly linked to self-efficacy and often occurs in successful problem solving. A qualitative study, using both observations and interviews, investigated the problem-solving processes and the self-efficacy of two students enrolled in an introductory physics course that implemented Modeling Instruction at Florida International University. We found that the problem solving process could be divided into two main phases: the goal setting process and the self-efficacy feedback loop. Further, from the qualitative data, the goal setting process could not be isolated from its impact on the self-efficacy of the students. This relationship between the goal setting strategies within the problem-solving process and self-efficacy may be linked to the retention of students in physics. We present results of the study and its possible link to student retention. © American Institute of Physics.