The U.S. Office of Education has permanently cut off all student financial aid funds to the troubled Lacaze-Gardner School, which is under investigation for the alleged fraudulent use of federal student aid money.

Lacaze-Gardner, which used extensive television advertising to attract it's low-income inner-city students, is heavily dependent on federal student aid. Last year about 70 percent of the school's 900 students received federal student aid of some kind to pay their tuitions.

It was not clear yesterday whether the school will attempt to resume its operation at some point in the future without federal money. The school's telephone has been disconnected and officials of the school could not be reached for comment.

Two weeks ago, the Office of Education placed a temporary freeze on all federal student aid for Lacaze-Gardner until fraud investigations by that agency and the FBI have been completed.

The school later sent letters to its 900 students suggesting they apply to some eight other schools in the area to complete their education.

Jerry Mellott, vice president of Strayer Business College, said yesterday that his school has invited the 900 students who were attending Lacaze-Gardner to a special orientation session at Strayer on Friday.

"We will follow our normal admission procedure," Mellott said. "The students will take math and English admission exams. We are anticipating that only a few of the Lacaze students will be admitted. We require a high school diploma for admission and most of the Laceze students didn't have a diploma."

One Lacaze student who would have graduated this month in business management, said he has been working as a temporary accounting clerk since the school closed two weeks ago.

The student, George Montgomery, said he hopes to continue his studies at Strayer, which has agreed to accept the Lacaze-Gardner credits of all the students who pass the admissions exams.

"I'm disappointed with the whole thing," Montgomery said yesterday. "Society says you've got to have a degree or a diploma to make it. I'm just trying to get the credentials society says I'm supposed to have. It gets tougher all the time."

Other former Lacaze-Gardner students are applying for admission at schools throughout the metropolitan area, including Columbia Technical Institute. Automation Academy and the Washington School for Secretaries.

Lacaze-Gardner schools in Falls Church and Langley Park have continued to operate as usual.

Ronald Pugsley, chief of the Office of Education's accrediting branch, said the agency is investigating those schools - which he said have never been accredited - to determine whether they violated federal regulations by accepting students who paid their tuition with federal loans or grants.

The downtown Lacaze-Gardner School, which has been the object of federal scrutiny for six months, has had a series of problems, including its abrupt closing two weeks ago, fires, the freeze on its federal funds, and a subpoena of its student financial aid records.

Within the last week, the newly decorated reception area of the school on 14th Street NW. has been dismantled and hauled away. The Lacaze-Gardner phone has been disconnected and large sheets of paper have been taped over the school's huge picture window.