The Seventh Day Adventist Church has agreed to pay $500,000 to the family of Paul Michael Costa, 19, who was paralyzed as a result of a tumbling exercise he performed three years ago while a student at the religious group's school in Takoma Park.

Melinda H. Costa of Brinklow, Md.,had sued the Takoma Academy and her son's gymnastic teacher for $6.5 million following the 1975 accident in which the youth's arms and legs were paralyzed. A settlement was reached yesterday just after a jury was empaneled to hear the case.

Marvin Ellin, attorney for the Costa family, said of the settlement, "We are all quite frankly very disappointed." Ellin explained that under Maryland law, the school is liable to pay only that amount which its insurance will cover because it is run by a charitable institution.

He said the Hartford Insurance Company offered to pay $500,000 in damages, the total amount of insurance coverage the school has. Defense attorneys did not disclose the amount of the school's insurance policy until yesterday, Ellin said.

"None of us are actually happy (about the settlement) . . . but we feel satisfied that we received the full limit of the policy," said the youth's mother.

"It's been agony, a real cross to bear," she said of her son's injury. "It's really agonizing to see your son perfectly healthy and very active in sports one minute and then the next minute he's not able to participate in anything."

Ellin said Costa was injured during tryouts for the academy's gymnastic team. Costa, who was 17 at the time, was attempting to bounce off a trampoline onto a vaulting box and land on his feet. Instead of landing on his feet, Costa dislocated his neck, and the injury rendered him a quadriplegic.

The boy's family maintained in the suit that the school failed to provide "an acceptable, proper and safe mat for the plaintiff to land on, did not provide proper supervision (in the gym) . . . and did not provide spotters," persons positioned around the trampoline who could have broken the youth's fall.

Ellin said the youth spent almost a year in the hospital before he was transferred to the Friends House nursing home in Sany Spring, where he now lives. Costa is confined to a wheelchair and requires constant nursing supervision. He is accompanied by a friend to and from Montgomery College, where he is studying for a bachelor's degree.

Officials at the Takoma Academy could not be reached late yesterday for comment.