Nation's first university outgrows its identity problems

''The University of Pennsylvania is the great untold story of higher education in America,'' says George Gerbner, dean of the Annenberg School of Communications at ''Penn.''

You might call Penn one of the surprises of ''Surprising Philadelphia.'' And though the phrase Ivy League usually calls up images of vine-covered, small-town New England rather than the streets of West Philadelphia, Penn is an Ivy school.

In 1779 Penn ''became the first institution of higher education in the United States to be designated a university,'' as a university publication carefully puts it, two years before Harvard College became Harvard University. And Penn has the added cachet of having been founded by Benjamin Franklin.

But saddled with typical Philadelphia self-deprecation, the University of Pennsylvania has long had a certain identity problem from which it has just begun to emerge. Having a name that leads to perpetual confusion with Penn State hasn't helped, either.

''We don't build ourselves up enough,'' says E. Digby Baltzell, professor of sociology and history at Penn. ''At Harvard they'll tell us they're best when they're not often enough. Here, we don't say we're best when we are.''

Says Dean Gerbner, ''Penn is a large, dynamic university that has been overshadowed by the reputation of the schools it sees as its peers.''

But the university has had a renaissance that parallels that of Philadelphia as a whole. It dates, says Professor Baltzell, to some time after World War II, when a series of activist presidents began to build faculties of national, rather than local, stature.

The university's new prominence of the last few years may be the result of reputation catching up with reality.

Professor Baltzell cites Penn's particular strengths: English, history, law, medicine, and architecture, as well as more specialized fields like veterinary medicine and folklore.

Penn's Wharton School, the first collegiate school of management in the world , is riding a wave of enthusiasm for business education. Long ranked in the top four or five graduate schools of business, Wharton is now consistently regarded as one of the top three, with Harvard and Stanford.

The Annenberg School, noted for its studies of television and other mass media, was the probably the first graduate school of communications that did not simply grow out of traditional undergraduate programs in journalism and broadcasting. This has given the school a sort of ''critical outsider's'' point of view -- ''a fresh approach to liberal education,'' as Dean Gerbner puts it.

Such a fresh approach is typical of the rest of the university as well. Every faculty member at Penn teaches at least one undergraduate course.

''Undergraduates are not impressed with what a great scholar you are. You say what you want to say and if they're not interested, they say so. Top scholars find it a tough challenge,'' says Dean Gerbner.

Penn students can generally take any course anywhere in the university, as long as they are individually qualified for it.

Penn's campus is probably a help here: Unlike a lot of urban unversities, Penn has a definable and fairly compact campus all in one place, part of the city, but with traffic on the edge of campus kept to a dull roar.

The school's architecture is academic eclectic in the best tradition, ranging from the Oxbridge-like Quad to Williams Hall. Benefiting from the city's long tradition of public sculpture, the campus is adorned with works ranging from a benign and paternal bronze of founder Franklin to contemporary works like Claes Oldenburg's oversized ''Split Button.''

The more recent buildings testify to the university's role in the architectural renaissance of Philadelphia. And gone are the cross-campus trolley tracks of a few decades ago.

The result, says Karen Freedman, Wharton's assistant dean for external affairs and an obvious Philadelphia enthusiast, is one of the ''most beautiful and most successful urban campuses in the country.''

The fancy new facilities and high-rise dorms have not been built without a certain amount of displacement of local residents, however, and residual mistrust of the university remains.

Penn, the largest single private employer in the city of Philadelphia, functions as an importer of talent when the students it draws from around the country decide to settle permanently.

But if Penn is a brilliant gem in the crown of Philadelphia resurgent, it is also a symbol of private higher education at a crossroads.

Despite annual tuition and room and board costs of $12,000, Penn still has 11 ,000 applicants competing for 2,000 slots in the freshman class. And never mind what you've been reading about the decline in the numbers of 18-year-olds across the country: applications are up 40 percent over four years ago.

Willis J. Stetson, dean of undergraduate admissions, says he sees this as a reflection of parents' willingness to regard a private university education as a ''durable consumer good -- something worth going out on a limb for financially.''

But this year's applications, though up from a few years ago, are actually down from last year. And this may be the first sign of a larger countertrend, of lack of confidence in the economy.

If the recession continues and student loans are cut back 48 percent, as the Reagan administration proposes, the money simply won't be there to borrow.

President Sheldon Hackney calls the proposed cuts ''Draconian.'' Penn would continue to find qualified students, but its present ''need blind'' admissions policy would have to change. And that would knock a hole in the school's efforts to maintain an egalitarian, economically diverse atmosphere.

But the mood on campus seems serene. Bulletin boards covered with ads for summer sublets and cut-rate magazine subscriptions suggest that Penn students are typical of the 1980s, hard-working and apolitical, with their minds on their studies and on the arrival of spring.