THE REAGAN administration and Congress have fought steadily for five years now over college students. Federal aid to higher education, mostly in the form of student aid, has been one of the fastest-growing items in the budget, and the president has regularly tried to cut it back. Congress has resisted, and the House Education and Labor Committee has now reported out a bill extending for another five years the Higher Education Act, which preserves the aid programs about as they are. The House may take it up next week.

Aid to higher education in its current form is part of a group of federal programs that did not exist 20 years ago and that now account for about an eighth of the budget. These are programs that give aid in kind to large numbers of people. The government helps pay doctor and hospital bills through Medicare and Medicaid, grocery bills through food stamps, and rent through the Section 8 program for the poor. As part of the same trend it also helps pay the cost of college.

Federal aid to higher education was $412 million in fiscal 1965. In fiscal 1985, just ended, it was $8.5 billion. More than a third of the 12 million people enrolled in post-secondary institutions now receive some combination of federal grants, loans, interest subsidies and loan guarantees. Much of the assistance goes to the poor, but by no means all; the loan programs have become important subsidies to the middle class. The largest loan program is an entitlement, meaning aid is automatic to all who qualify. The other large program, of grants, depends on an appropriation each year, but Congress has formed the habit of appropriating whatever the grant formula requires.

The in-kind programs have all been special targets of the Reagan budget-cutters. The administration's view is that the nation never quite willed that any of these programs should grow to its present size. In budget documents supporting proposed "reform" of the student aid programs earlier this year, the Office of Management and Budget spoke of "an unrestrained 20-year binge" and "a shotgun approach that has indiscriminately sprayed assistance at students regardless of income for almost any conceivable type of education." It argued that the programs are a jumble, have never been thought through, help too many middle-class families who should help themselves and subsidize too much second-rate alongside first-rate education.

Right here and there, but on balance wrong. The student aid programs are one of the great and underappreciated equalizing forces in the society, coherent enough as a group and no more generous in the middle-income ranges than justified by the high cost of higher education. Where abuses have surfaced, there have been stps to correct them; there are more such steps in this bill. The government should not be in the business of deciding which is second-rate and which is first-rate education. By helping to create a buyers' market in higher education, the present programs have stimulated healthy competition among institutions. The House is expected to pass the committee bill easily -- and it should.