Kathy, 8, dropped out of school last spring. She lives on the fringes of Virginia's suburban sprawl in the family clutter of a new split-level.

Susan, 9, went to school for the first time in three years this fall. She lives on Capitol Hill in a sparse, doll-size apartment decorated with carefully matted samples of her artwork.

Kathy's parents, along with an unknown number of others in the area, are teaching their children at home, because they are dissatisfied with formal education, and they are convinced they can do a better job. In practicing their ideals, Kathy's parents are breaking the compulsory school attendance law.

Susan's parents (her father is pediatrician Robert Dickey), on the other hand, received authorization for home instruction and value it as an option they may use again.

Some of the "unschoolers," as they like to call themselves, decided to keep their children out of school because of a negative experience in the system; others simply want their children to have a better education than they believe schools can provide.

Some shun mainstream society and list schools as only one of their grievances; others are quick to disassociate themselves from an antischool movement.

Many of the unschoolers are members of the same back-to-basics movement likely to advocate strongly such things as health foods, breast feeding and monitored TV-viewing and reject mass conformity and "big-brother" government. mUnschooling is their latest strike for individuality.

These parents are reluctant to talk about their home schools, because they don't want to tip the legal scales and force an investigation for even stricter school-attendance laws. They speak of "keeping a low profile," or of "not wanting to ruffle the school authorities' feathers."

Susan's parents and Kathy's parents agree with school-critic John C. Holt's contention that children are naturally eager to learn, but school can crush this enthusiasm with the three Rs: rules, routine and rigidity. They consider their children's individuality a precious asset which may not survive group instruction and peer pressure.

"There's no chance for individuality in schools, because the teacher has to deal with 40 children. Everything has to be in its place and time," says Kathy's father, 40, who is with the Navy.

"If children aren't the same as everyone else, they are called 'disabled,'" adds his wife, 39.

Lst spring, Kathy's teacher declared her a learning-disability student and recommended she repeat the thrid grade. The child hated reading so much she had to be bribed to finish every page.

"Kathy was a happy-go-lucky child until she started school," says her mother. "She became tense, lacking in confidence and very hesitant. The longer she was in school, the less she was able to read. She didn't want to go back to school, and I was afraid repeating would impair her self-image."

Encouraged by Holt's "How Children Fail" and his newsletter "Growing Without Schooling," Kathy's parents decided they could give her more attention at home, and "teach her a much as the school could in less time."

Her sister, a 10-year-old with a B-plus average, also wanted to stay home to escape the pressure of "too much homework" and to work at her own slower pace. Kathy's brother, however, was content to continue high school, once he transferred from a school where he was taunted as "different," because he was preoccupied with astronomy and didn't wear Levi's.

Kathy's mother, a strong-willed woman who doesn't mix much with her neighbors, says her decision to try unschooling evolved over a period of months.

"I felt terrified. I was brought up to believe school is the place to learn. I had to fight my own prejudices and lack of confidence.

"But I was annoyed with the schools," she adds, understanding the anger that drove her to deception. She told Kathy's principal, her neighbors and anyone else who asked that her children are attending a small, private school in the next county. She is not going to try legal channels, because she is convinced her home-teaching won't qualify under Virginia school law.

"It's a risk, but we are willing to take a chance," says Kathy's father. "We wouldn't be doing this if we didn't have our children's welfare at heart." "

Susan's mother, Sharon Dickey, who is in her mid-30s, also believes her daughter suffered from her first school experience. The recent local and national winner of the international Child's Play writing contest (coordinated by National Public Radio and sponsored locally by Wamu-fm), she is a precocious child who was composing melodies on the piano, reading and painting at age 3. She regressed, her parents believe in kindergarten.

"She went from painting her versions of Saul Steinberg's modern art to doing the same rigid houses with the same rigid people as her classmates," says her mother. "She got the idea that her music was unworthy, because it wasn't the way her teacher said it was supposed to be.So, she stopped creating on the piano and just worked on one-finger exercises. She had loved reading Dr. Seuss, but after sitting through the slow, painful process of pre-reading exercises, she wouldn't touch a book.

"The school didn't want Susan to enjoy learning. They wanted her to work, so she can grow up to be a hard worker. It took me nine months to unwind her from school, so she could rediscover herself and be creative again."

Susan's mother recounts her daughter's experience in a quiet voice, but her alarm comes out in words like "stifled" and "depressed."

She won permission from the District of Columbia school office to tutor her daughter after she submitted a curriculum, proof of her B.A. degree, list of educational materials and the promise to send in a progress report every semester. The reason for her request, she says, was interest, available time and ready resources.

At home, Susan's mother created a private, privileged world for her daughter that was as unrestricted as her kindergarten was structured. Susan read for hours from shelves stocked with textbooks, children's stories and beautifully illustrated books on art and natural history. She painted until she finished a project, and she learned math with coins, playing cards and cooking utensils.

When she wasn't at home, Susan was taking art lessons at the Smithsonian, touring museums, watching films at the National Geographic Society and visiting art exhibits. She was allowed to plan each day and never, said her mother, did she hear, "Let me show you the right way."

Kathy and her sister are using workbooks bought at the grocery store and reading library books. Their parents cannot afford the correspondence study programs offered by several private schools, but they plan to organize their own program. They said they are not worried about their daughters' academic progress, because "if they can read, they can learn anything. We don't need special equipment. If there is a subject we can't handle, we will seek outside help."

The benefits, says Kathy's father, are already apparent. "I don't come home every day after work and hear that Kathy didn't do well. And I don't have to prod my children to do their homework."

According to Kathy's mother, "The kids are a lot calmer now that they are not going to a place they hate. The whole family atmosphere has improved."

Yet, the family lives with the daily fear that they will be discovered. The girls are kept indoors during school hours so neighbors won't question why they are home.

Kathy's father also worries about his daughters losing their social life. "I may be projecting my own feelings. They've never actually said they are lonely, and in fact they complain less now about not having anyone to play with. Ballet lessons and occasional sleep-overs with friends from their old neighborhood seem to suffice."

While Kathy is just beginning her unschooling, Susan has decided, for the present, to end hers.

"She reached the psychological stage where she wanted to be part of a group," says Susan's mother. "She loves school now, but that is because her three years out allowed her to develop her individuality. She has the maturity to keep her own style and still follow the group's rules."

Susan's transition into the public-school system, reports her mother, has been smooth except for a spelling problem. "Socially she is doing fine. I see children who are shuffling around in groups and are clannish among strangers. But Susa is open with people."

"School for most children is mandatory," she adds. "But for Susan it is a privilege, because she knows that anytime she needs to be out, I will help her stay out."