A congressional study places the largest government estimate yet on the price of bailing out the nation's failing savings and loans and says the cost could soar even higher unless action is taken quickly.

The General Accounting Office says the government should spend $112 billion to close failed institutions and abandon its current strategy of trying to keep the institutions alive through assisted mergers.GAO said the Federal Savings and Loan Insurance Corp., or FSLIC, will need $85 billion over and above the $27 billion it expects to collect in fees from S&Ls through 1998.

However, the congressional auditing and investigative agency warned that the price tag will be even higher if interest rates rise. Most economists expect rates to climb through the middle of next year, but offer no firm predictions beyond that.

The investigative agency, in a draft of a report to the House Banking Committee, sharply criticized the Federal Home Loan Bank Board, regulator of the nation's 3,000 S&Ls, for attempting to rescue failed S&Ls by providing money to private merger partners.

The report noted that the insurance fund spends on mergers about 90 percent of what it would cost to simply close insolvent institutions and pay off depositors. However, mergers do not always resolve the problem and, counting tax losses to the government, may well be more costly, it said.

"Regulators and Congress have resisted massive closings of insolvent savings and loans in the hope that the fortunes of these institutions would reverse themselves," it said. "This hope has proven both futile and costly."

It noted that industry losses totaled $9.4 billion in the first nine months of this year.

The GAO said failed S&Ls should be placed into receivership in the next year and most of the $112 billion should be spent in the next three years.

The bank board has avoided that approach, arguing that massive closings could leave some areas of the nation without service from an S&L and that a flood of repossessed real estate from failed institutions could deepen the regional recession in the Southwest.

Breaking down the $112 billion, the GAO said $77 billion will be required to close insolvent - but still open - S&Ls, which numbered 434 at the end of September. Previously, GAO and the bank board had estimated that closing insolvent S&Ls would require about $50 billion.

The new report also cites additional expenses, including $10 billion needed to finance borrowing by the FSLIC, which guarantees S&L deposits up to $100,000, and $5 billion likely to be required for losses that have occurred but haven't been discovered yet. An additional $20 billion should be set aside as a reserve against future losses, GAO said.