Frank Terpolilli will soon be helping President Reagan keep a campaign promise. For the cause and conservative philosophy of paring big government, Terpolilli is losing his job in Philadelphia as a collector of defaulted student loans for the Department of Education.

Naturally, he's not too thrilled with the idea.

"You get the feeling of security with the federal government, and then all of a sudden they pull the rug out from under you . . . . You're being terminated, that's it, tough," said Terpolili, 32.

Terpolilli and nearly 600 other students-loan collectors scattered in regional offices around the country are about to become some of the first casualties of the Reagan administration's war on government growth. In their case, however, a recent decision to turn the loan accounts over to private collection agencies had a particularly bittersweet note: it came in a March memorandum of praise from Secretary of Education Terrel H. Bell.

The federal collectors had established an "impressive" record, Bell said, returning more than $3 for every $1 of cost to the taxpayer. But the secretary argued that his department ought not to be performing a function that could be done just as well by the private sector.

His comments have provoked an angry outcry from the government employes most affected by Bell's decision. The student-loan collectors are hurt that their reward for doing a good job is dismissal. They also are furious at being replaced by private collectors who, they warn, won't do nearly as good a collection job as the government is already doing for itself.

"The jobs aren't the point," said Gary Caramanis, an administrator of the education department's loan collections office in Boston. It's just that all of us are shocked that the government is doing away with one of the most successful programs it's ever had. To hell with me. Take us all out and put in others, but let the program survive."

Such protest have sparked a congressional inquiry about the agency's decision -- a decision Caramanis and others say was made "by people who don't know the collections business."

Secretary Bell, moving quickly to quiet the storm in his regional offices and on Capitol Hill, defends his decision to phase out most of the department's in-house collectors by the end of September.

"If you have a choice of having government do it or the private sector with all things being equal, you'll turn to the private sector every time," Bell said in a telephone interview this week. "And you wouldn't be surprised to hear that from a spokesman for this administration."

But Bell cited other factors in his decision, chief among them the congressionally mandated need to trim his department by 500 employees before May 4, the first anniversary of the agency's establishment. The personnel cuts became additionally pressing, Bell said, when he discovered that the Carter administration had hired 160 new persons for the agency between Nov. 4 and Jan. 20, a discovery that the secretary says made him "outraged."

In the end, Bell said, it came down to a choice between a "RIF," reduction in force, of career civil servants working elsewhere in the agency or the removal of employes who were never looked on as permanent workers anyway.

The education loan collectors, who earn $12,000 to $15,000 a year, were hired as what the government calls "term" employes, without the job protections afforded career federal servants. They began coming into the agency in 1978 with the understanding that their jobs would be temporary -- just long enough to help clear up a backlog of millions of dollars worth of student loans that had gone into default. Unless their employment was extended or they were moved into permanent job classifications, all of them were to have been terminated by June 1982.

Working shifts that routinely last until 8 p.m., the loan collectors spend most of their time on the telephone. In Philadelphia, for example, Louis Dupre, 32, devotes hours of telephone time to contacting relatives, possible employers and possible friends of those who have received student loans but have yet to begin repaying them.

"Each call has one objective -- to establish the repayment of the loan," said Dupre, one of about 60 such collectors in the Philadelphia office, which oversees the student loan program for schools and lending institutions in the District, Maryland, Virginia and three other states.

Sometimes the calls produce an address or other means of contacting the loan defaulter. Often, however, locating a loan recipient can take weeks months or years. The banks and colleges that make government guaranteed loans have little staff or facilities for tracking down defaulters, and until the government began going after them -- and taking the most stubborn ones to court -- some loan accounts had languised in files for up to 15 years.

"You may run into a hardship or someone who flat doesn't want to pay," said Dupre. "There are people who are making $40,000 to $50,000 a year."

The government got into the collections business by promising to make good on loans that banks and universities have tried and failed to collect themselves. The idea was to encourage them to provide low-interest student loans.

Bell has credited his in-house collectors with processing about 90 percent of the backlog of 600,000 defaulted loans during the last four years. But a high-placed regional administrator of the program says there are still more than 41 billion worth of Guaranteed Student Loans and National Direct Student Loans in need of collecting.

"And let's face it," said another government collector. "If we don't contact these people, they're not going pick up the phone and call us."

At the core of the dispute is a debate over who can best go about the cruicial business of recouping the loan money and recycling it back into the government's student loan program. Bell and his advisers, pointing to management studies and their own experiences with two pilot programs that used private collectors, have concluded that the private agencies can do the job as well or better than agency personnel.

"The data is so difficult to analyze, but the reports indicate that using private agencies seeems to be at least reasonably cost effective," said Nazzerino Colzzi, a special assistant for student financial aid who is preparing a contract that the agency hopes to put out for private bids by the end of this month. The firm or firms selected would work on all the outstanding accounts for a percentage of the loan amount, expected to be at least 35 percent.

This confidence in the private sector is not shared, either by the department collectors who are about to lose their jobs or by several regional administrators who have invested great effort in setting up the present in-house collection program with people trained in the special intricacies of education loan requirements.

"The secretary has been very poorly advised," is the gloomy assessment of one regional official who declined to be quoted by name. "We have some excellent people who can do the job, and it's just foolish to chop the program off. I just got the resignation of one lady who's had four years of training in collections and now she's going to work in a greenhouse. It's a total waste of valuable talent."

William Hudson, the collections branch chief for the department's claims and collections division in the Kansas City, Mo., regional office, warns that the private firms will go for the "easy money," skimming off the cream of the more collectible accounts and ultimately returning the hard to collect ones to the government.

"I spent 13 years in the private area of credit and collections work, and I can tell you that the private collectors are considered the collection of last resort. They will do the quickest and easiest and most efficient thing on those accounts to get their money because they will be working on the profit motive."

Hudson said he already has lined up another job for himself but complained that many of those in his office, including 10 handicapped employes, "have worked hard here and are being dumped out on the street now." Even the permanent, career employes will be out of jobs unless they are willing to relocate to one of the three regional offices the department intends to keep open, Hudson said.

Department officials pushing the private collection program expected to get under way this fall say they are trying to structure the contract to minimize the "skimming" temptation and to provide first-hiring preference to the term employes who lose their governemnt jobs. They argue that they have a lot of leverage with these private firms who are anxious to take over the department's "big bucks" collections business.

Still, the feeling of being phased out before your time persists. One official not directly affected by the collections shift says the decision is not getting at the real waste in government. He notes that legislation has been proposed that would consolidate 67 of the agency's 117 programs into one block grant to be made by the states.

"There are people sitting in offices in Washington who won't even have a function if this goes through, yet they're all keeping their jobs," he complained angrily. "It's purely a numbers game, not payroll. You've got to cut personnel so you take people who are doing a great, useful job and you say 'so long.'"

Hudson, who has peppered the congressional offices and the media with his protests, is "angry and upset" but doesn't expect the decision can be turned around. "I'm not mad at Mr. Reagan or even Mr. Bell, but I'm not sure they're acutally well informed. I know this sounds like a hard luck story, but I'd sure like to make somebody answer why."

So would a particular congressman, Rep. Paul Simon (D-Ill.), chairman of the House subcommittee on postsectionary education. He has asked Bell in a letter to explain why the agency "is attempting to dismantle an efficiently functioning federal system and replacing it with a private sector system which has obvious limitations and no proven track record."

Bell, clearly troubled by the growing uproar, said he had little choice but to meet the law and cut his agency's staff.

"It was a very difficult decision, but I felt the one we made was the better one looking at the options we had," he said. "It's human nature to fight for your job or your administration fiefdom, and I don't mean that to sound derogatory . . . . I think it was a wise decision, but when I say they're biased, I have to say I'm biased also."