"It may sound far-fetched for feds to be hawking love," says Jack Kenyon, chief of the Foster Grandparents Program, "but, by golly, that's exactly what we're doing and we make no apologies for it."

Possibly no federal program facing close scrutiny by Ronald Reagan's cost cutters has less to worry about. A part of ACTION, the government's volunteer service agency, Foster Grandparents has a friend in high places these days.

It is, quite simply, Nancy Reagan's "pet project."

And, says Reagan spokeswoman Marie Maseng: "As first lady, she intends to continue supporting the Foster Grandparents Program" as she has for almost 15 years, since her earliest days in the California governor's mansion.

Nancy Reagan first noticed the little-known program -- designed to bring together aging volunteers and mentally and physically handicapped youngsters -- in 1966 while visiting a state hospital. She helped expand it to all California state hospitals. "I've always felt most programs benefit only one side," she says in her 1980 autobiography, "Nancy" (William Morrow & Co., $9.95). ". . . But here was a program in which both sides benefited -- the elderly who served as grandparents and the children.

"Old people often experience a point in their lives after their children are grown and gone when they feel lonely, unwanted, unneeded and unloved. Yet they still have so much to give.

"In the other half of the equation are the mentally retarded children who need a great deal of attention and love, more than any hospital can possibly provide. Bring these two groups together and each gives what the other needs."

That equation has multiplied nationally to 17,600 older men and women who now give at least 20 hours a week as surrogate grandparents to over 50,000 children in hospitals, correctional institutions, homes for the emotionally disturbed and day-care centers.

In practical terms, their daily tasks include dressing and feeding the children, playing games and reading stories, helping with speech and physical therapies, even tutoring in school work.

But the secret of their success, says Kenyon, is the affection and encouragement they show the attention-hungry children who sometimes have no other family.

In return, Foster Grandparents receive a modest payment to cover the costs of volunteering -- plus benefits such as transportation allowance, hot meals at work, and an annual physical examination.

"That's not most important," says volunteer Nancy Rucker. A retired District of Columbia civic worker, she had made the long drive to Forest Haven -- a facility for the mentally retarded in Laurel -- five days a week for nine years.

"What is important is that my two 'grandchildren' know they're going to have a good day as soon as I hug 'em," she says of the severely retarded teenagers who look for her each morning."They rarely recognize anyone, but they know me."

Theodore Inabinet, a 75-year-old Foster Grandparent who helps 3- and 5-year-olds at a 14th Street daycare center in the District, calls the job an "elixir."

"I live alone and you know I'd be mighty lonely without those little kids," he says. "They're just beginners and they give me a livelier spirit than just sittin' around by myself."

That sort of enthusiasm ahs expanded the program to its budgetary limits -- leaving many older applicants on waiting lists in some locations. Program officials say they hope Nancy Reagan's "support" may relieve the financial bind.

"I am pleased in whatever part I've played in its success as anything I've ever done," she says in the book. "The program gives the elderly a whole new life, a reason for getting up in the morning and a purpose of living. The children, of course, respond immediately to extra love and attention. Their regular daily contact with their Foster Grandparents makes a big difference in their lives."