The crucial importance of a student's dependent or independent status is the level of financial contribution expected of the family. A dependent student, regardless of the financial status of their parents will have a federally mandated Expected Family Contribution (EFC) that is deducted from the costs of attending a postsecondary institution when determining their financial need and eligibility for grants and loans.
An independent student must be 24 years of age or older by December 31 of the award year or meet one of several other requirements. A student is independent if they were an orphan or ward of the court until the individual reached the age of 18, is a veteran of the Armed Forces of the United States, is a graduate or professional student, is a married individual, or has legal dependents other than a spouse.
A student that qualifies as independent may be eligible for financial aid even without an EFC deduction even if they receive financial support from their parents. On the other hand, a technically dependent student will have the amount of their eligible financial need reduced by the amount of the expected family contribution even if they receive no assistance from their family.
Simply moving out of a parent's home does not make a student legally independent, and neither does their family's unwillingness to provide financial assistance. Some institutions will allow students to appeal their dependent status, but proof of severe circumstances such as abuse or death of a parent is usually required.
The most commonly sought form of federal financial aid affected by a student's status is the Pell Grant, which offers up to $5,400 per year to qualifying students. The amount of aid actually awarded is determined by the annual cost of the school minus the expected family contribution, which is often several thousand dollars annually for a dependent student and as low as zero for one that's independent. The government formula for calculating the family's contribution takes into account the median income of their state of residence, the size of the family, and their adjusted gross annual income, though private institutions may use different methods for assessing financial need. Perkins and Stafford loans use the federal formula, but award money that must be repaid at interest.