The U.S. Department of Education calculates the Expected Family Contribution (EFC) by using a predetermined formula.
As noted on the official FAFSA website, the EFC is a measure of your family's financial strength and takes into account factors such as the family's taxed and untaxed income, assets and benefits.
The size of a student's family and whether any other members of the family are currently enrolled in or will be attending college within the year are also taken into account. In other words, the EFC reflects the amount of money a student's family is likely to contribute toward the student's education for that year.
Once the FAFSA is submitted, it gets processed and the results are sent to the student and the financial aid offices of the schools that the student entered in her application.
The EFC is established during the processing of the FAFSA and is used to indicate the amount of financial aid the student qualifies for. Generally, students with the lowest EFC numbers are awarded the most financial aid. Typically, the cost of school attendance, minus the EFC, equals the approximate amount of a student's financial aid.