Steven Scher, 6, profoundly deaf since birth, has been placed in a gifted reading group with hearing children in the first grade at Montgomery County's North Lake Elementary School.

Steven can't hear a word of what his teacher and schoolmates say, yet he understands almost everything that goes on in class. When tested recently in language and math skills with hearing children, he scored in the 91st percentile.

Steven is one of eight severely to profoundly deaf children at North Lake who are enrolled this year in a new and significant program of deaf communication: cued speech, a method of communication in which lip reading is supplemented with hand signals.

When Steven's class gathers around teacher Gloria Harvey for a story, Karen Koehnlein, a cued speech interpreter, sits next to the teacher and makes the appropriate finger signs and lip motions so that Steven can understand what is being said. When Steven and his classmates are grouped around a table working on class assignments, Koehnlein sits with them and cues their conversation to Steven.

Developed more than a dozen years ago at Gallaudet College by R. Orin Cornett, a former assistant commissioner of education, cued speech has spread slowly. According to the Cued Speech association here, the formal cued speech program that began in Montgomery County schools this fall is one of the few -- if not the only one -- of its type in public schools in the nation.

It has attracted a small and enthusiastic corps of supporters who contend it offers deaf children a path to linguistic agility that few other methods can match.

"Four years ago we were just begging Steven to talk. Now we can't shut him up," says Steven's father, Barry Scher. "And he loves books. He reads all the time."

Unlike most of the deaf children at North Lake, Steven is not new to cued speech. He and Tiffany Balderson, a deaf kindergarten student at North Lake, spent the last two years in an experimental cued speech program at National Child Research Center, a private preschool in Northwest Washington.

In the meantime, Sher and Andrew H. Balderson, Tiffany's father and the president of the Cued Speech Association, put constant pressure on Montgomery County schools to begin a cued speech program. Their efforts were assisted substantially by federal legislation mandating a "free and appropriate" educational program for all handicapped children.

"We're just extremely pleased that Tiffany is able to go to a public school," said Balderson. "That kid gets up at six in the morning to get ready for the school bus that comes at eight. She is so excited about going to school. She talks about the things that have been going on at school, her teachers and her classmates. To appreciate where she is now, you have to understand where she has been and what she has gone through. She was born profoundly deaf. She has had open heart surgery. She has slow motor development and she has an eye defect."

Like the other deaf children at North Tiffany is "mainstreamed" in a regular classroom for most of the day, but taken out for periods of speech therapy and other special training.

Jo-Ann Stockglausner, supervisor of auditory services for Montgomery County schools, says she received her first request for a cued speech program back in 1969, but found data on cued speech still inconclusive at that point.

As designed by 'gallaudet's Cornett, cued speech is essentially a manual supplement to lip reading. It consists of eight hand shapes used in four different positions near the lips to make all the sounds of the English language look different. Most importantly, perhaps, the system is easy to learn.

"The phenomenal thing about cuing is that any parent can learn it," says Scher. "It only takes eight to 10 hours of instruction."

Because the system is based on phonetics, cued speech supporters argue, deaf children who learn that method develop a linguistic agility that many other deaf people never acquire. Unlike sign language, they argue, cued speech is based on spoken English. Thus, children who learn this method develop a familiarity with English syntax that gives them an advantage over other deaf children when it comes to learning to read.

"It is a simple way of solving a complex problem," says Jim Latt, the cued speech teacher at North Lake and a specialist in teaching hearing impaired children. "Most deaf children have trouble lip reading because there are so many sounds that look alike."

A former student at Gallaudet, Latt first became interested in cued speech when he saw a demonstration by some students who had studied under Cornett.

"I went to observe and watch, and I was totally bowled over by the amount of language they had," he said.

His days at North Lake are spent working individually and in small groups with the deaf children.

Thursday mornings, for example, he accompanies preschoolers Todd Goldberg, Harry Wood and Simon Raffe to their weekly music lesson with teacher Jennifer Boice. Although none of the three can hear, they watch attentively as Boice strums a guitar while Latt cues her words to them. Later, they take turns playing a xylophone, holding their hands against the bars as they are struck.

"There's no way you can get inside their ears," says Latt, adding that he is convinced there are at least some residual auditory sensations from the vibrations. Even the faintest sense of pitch or contour will be helpful later on when the children are trying to understand the subtleties of tone and inflection that are vital to the spoken language, he adds.

North Lake was chosen almost a year ago as the school for the cued speech program -- it is currently one of the schools recommended for closing by the county school administration. But at hearings before the board of education last week, Stanley D. Abrams, a lawyer for the Cued Speech Association, warned that closing North Lake would violate civil rights of the deaf children as guaranteed under federal law mandating education of handicapped.

"Any attempt to move this program out of its existing favorable environment will court disaster for the program and for the participating handicapped children," Abrams said. "These particular children have certain procedural rights which cannot be denied or abridged by any closure action of the board."

Last year, when the faculty and parents heard that deaf children might be coming to the school, they wre unanimous in support of the idea.

"We saw it as a positive experience for the children and it has been," says principal Carolyn Ray. "It's been a marvelous, fantastic experience for all of us."

Says Andrew Balderson, "The hearing children were ready and prepared to receive the deaf children. It was not like the deaf children were thrust upon them."

In fact, the deaf children have achieved something close to celebrity status in a few of the classrooms. In Steven Scher's first grade class, some of the hearing children have watched Karen Koehnlein's cues, and are gradually picking up the fundamentals of cued speech.

A classmate, Page Giddings, takes great delight in boasting that she has learned to say, "hi, bye and hello" in cues.

In a combined fourth and fifth grade class, teacher Nina Willett learned cued speech on her own time last spring to be able to communicate with Tiri Scott, a deaf fifth grader in her class.

"The whole idea of communicating with deaf people was exciting to me. I took it as a personal challenge. It is so rewarding. I really enjoy being able to communicate with Tiri and have her understand me," said Willett.