The calculation of the Expected Family Contribution (EFC) drives need-based eligibility.  

Independence as a student means that the parents’ financial situation is not considered, only that of the student (and spouse if married). Normally, independent students pay less as determined by the federal rules and qualify for more aid. To be considered independent one of the following must apply to the student

1. He or she is age 24 or older by December 31st of the award year (the year the student is seeking financial aid).
2. He or she is married.
3. He or she is enrolled in a graduate or professional educational program.
4. He or she has children or legal dependents other than a spouse.
5. He or she, since age 13, has been in foster, or a ward of the court.
6. He or she is on active duty or is a veteran of the U.S. Armed Forces.
7. He or she is currently an emancipated minor.
8. He or she is currently or was in legal guardianship 
9. He or she is homeless or at risk of being homeless
10. He or she has been found to be independent by the financial aid administrator based on documented unusual circumstances.

“Need" is established when the total cost of attendance (tuition/fees + room/board) for one year's education at a specific school exceeds the EFC, whether determined by Federal or Institutional Methodology. Let’s look at an example of two students planning on attending the fictional State University. State U. costs $25,000 a year and Jimmy Jones’ EFC is $10,000. The difference ($15,000) is his established need. However, Sara Garcia’s EFC is $27,000. The difference is $-2,000. No need is established, and Sara’s family must turn to non-need-based sources of aid for assistance.  

So, need is the relationship between the cost of one year's education at a specific school and what the government determines to be the family's fair share of that cost. 

“Need” will vary based on the cost of the college or university in question and the Methodology used to determine the EFC. Again, the major difference is that the FAFSA does not ask for home equity information while the CSS Profile and some institutional forms do. In some cases, more detailed financial information on business enterprises is required as well. As a result, there could be about 12% of the equity value tacked on to the Federal Methodology's determined EFC. Another example: Say the EFC based on the FAFSA was $12,500, and the family had equity of $20,000. The Institutional Methodology could tack on an extra $2,400 (12% of $20,000) to the EFC, pushing it up to $14,900.

In determining the family's EFC, the Department of Education assesses the parents' and student's (or independent student's and spouse's) financial situation--income as established by the previous year's tax information and current assets value reported as of the day the FAFSA is filed. Reportable assets do not include the value of retirement accounts (any amount added to retirement accounts during the reportable tax year will be assessed), life insurance or annuities, nor equity in the home.