The stylish, colorful banners in the hallways are the first clue that something different is happening in this government building. "Welcome to the Office of Student Financial Assistance Programs. Government's First Performance-based Organization. Serving our customers."

Customers?

It's not a word often seen or heard in federal agencies, but this agency--charged with dispensing $50 billion in aid to college students--is the biggest experiment to date with Vice President Gore's notion to "reinvent" government in the image of business.

For nearly a year, the Department of Education's Office of Student Financial Assistance hasn't had a director, but a "chief operating officer"--Greg Woods, a former deputy director of Gore's National Partnership for Reinventing Government and, before that, a software executive.

Woods talks a different talk from career bureaucrats. He has reduced the agency's mission to a sound bite, "We help put America through school." He has reorganized the agency around the "channels" or "customer segments" served--students, colleges and private financial institutions--instead of the different aid "programs" funded by Congress.

A brand new concept for the agency is the "unit cost" of processing each student loan or grant, which Woods has pledged to cut almost 20 percent in the next five years. (First, the office had to go back and calculate those costs.)

One potential source of savings is to do more "electronic transactions," in this case, online reviews of student aid applications. About 70 percent of the 10 million applications are received and processed the old-fashioned way, on paper. Not only is paper-shuffling more costly, Woods says, it is more prone to human error.

"We're in the electronic products business. We need to think like that," Woods says.

Last year, the Higher Education Act authorized the performance-based organization as a new model for an agency long criticized for not doing its job well.

Nobody claims Woods has turned around the agency, but he gets good reviews from . . . customers.

"Greg Woods is customer-focused, very sophisticated about technology and entrepreneurial in his outlook. But he's dealing with an agency that's thinly staffed and has suspect administrative capabilities," said Terry Hartle, senior vice president of the American Council on Education, an umbrella group of colleges.

"I think Greg has done a wonderful job," said Jamie Pueschel, legislative director of the U.S. Student Association. "He initially sought out talking to students."

But customers recently got a reminder of the agency's classic shortcomings: It printed more than 3 million aid applications that contained incorrect references to line items on income tax forms. About 100,000 of the applications that were on the way or already at colleges around the country were swiftly recalled.

Woods agrees the glitch resembled the agency of old. But the response, he says, was new-style: "When we make a mistake, promptly admit it and put it right. That's a business principle."

It was a small problem, Hartle and Pueschel say. Solving the agency's biggest one will be tougher--integrating 10 computer systems created for different aid programs over the decades. Fixing that, Woods estimated, will take about three years.

CATCHY SLOGAN: As Congress rewrites legislation that funnels federal aid to elementary and secondary schools, Republicans have been promising to send the "dollars to the classroom" by loosening regulations and cutting bureaucrats. They believe they have found a sensible-sounding slogan that will catch ears and, come election time, votes.

Like a lot of political lines, this one has origins outside the Beltway--in fact, way out west in Texas. No, the pride of coinage doesn't belong to Gov. George W. Bush, the Republican presidential front-runner. Instead, credit Comptroller Carole Keeton Rylander, a Republican who pledged in her election campaign last year to "get more of the education dollar directly into the classroom."

No lesser authorities than Harvard's Kennedy School of Government and the Ford Foundation have judged Rylander's office to have done just that. Last week, they honored the comptroller's Texas School Performance Review with one of the Innovations in American Government Awards.

Any celebration over the award shouldn't get too partisan, though. The program, which has conducted audits of 34 school districts in Texas and saved nearly $400 million, was launched in 1991 by Rylander's predecessor, John Sharp--a Democrat.