5 Tips for Parents Baffled by College Aid

If you're confused about what makes Pell different from Stafford, Perkins, PLUS and everything in between, you're not alone.

A new study finds -- not surprisingly -- that most parents don't understand the terms of their children's financial-aid packages for college. More than three-quarters of those surveyed by branding firm Siegel+Gale didn't know there is a big cost difference between subsidized loans and private loans, which come with higher interest rates.

A healthy portion of working-class families eligible for Pell grants -- 40% -- was also unaware that those don't have to be repaid.

"Parents really don't understand the true cost of college and the financial help that is available," says Peter Cohl, leader of Siegel+Gale's higher education division, "nor do they understand the difference between loans, grants, scholarships and work-study funds."

Some of this comes down to ignorance on the part of the borrowers, who tend to avoid reading the fine print and asking questions before accepting a financial-aid package. The Department of Education admits that these packages can be overly complex and is working to simplify the federal financial aid system and the application process, though colleges, state agencies and private lenders play a part in the confusion as well.

For instance, Siegel+Gale notes that each entity can use separate "jargon, acronyms and definitions" to refer to the same thing. As a result, parents and students -- especially those who are going through the tricky process of education financing for the first time -- are left befuddled.

Cohl suggests that confused parents call or visit the school's financial aid office to clarify terms of the aid package. He also stresses that, as with any major investment of time and cash, students and parents start planning years before college to save cash and scout out scholarship opportunities.