The college a student chooses to attend often depends on the financial aid award letters. Families compare the aid packages and go with the more generous college.

The problem, according to a new survey, is that many families don’t understand the difference between grants, scholarships, loans and work-study.

And what you don’t understand can cost you. You can end up turning down an aid package comprised of grants that don’t have to be repaid in favor of a package made up of loans.

Siegel + Gale, a branding company, surveyed more than 200 parents of college-age children. The group’s findings:

- A quarter of parents didn’t know grants generally don’t have to be repaid.

- More than two-thirds didn’t realize that student’s work-study paycheck is subject to income tax.

- Less than half knew that some student loans don’t require a credit check.

- Seventy-seven percent didn’t know the difference between a subsidized and unsubsidized loan. (Subsidized means Uncle Sam pays the interest on the loan while the student is in school.)

- Forty percent didn’t realize Pell Grants are not loans, but federal grants that don’t have to be repaid.

“All of America’s colleges and universities ought to adopt a simplified, standard financial aid award letter so parents can make comparisons across schools,” says Peter S. Cohl, Siegel + Gale’s Higher Education practice leader in statement.

Cohl also suggests schools rank the awards in order of value to the student, from grants and scholarships high on the list and pricey private loans on the bottom.

Good idea. But families can’t wait for schools to act. Parents and students need to educate themselves about financial aid terms. FinAid is a good resource. Also SimpleTuition allows you to search for and compare loans.