The objective of this paper is to examine the impacts of decreases in student numbers on the cost of education in Indiana. The reasons why decreases in student numbers might affect educational costs are examined. School corporations where student numbers have decreased most rapidly between the school years 1972-73 and 1976-77 are identified. The extent to which the problem exists in urban, suburban and rural schools is examined.The degree to which a decrease in student numbers increases per pupil expenditures is measured. Impacts of changes in student numbers on pupil/teacher ratios and teachers' salaries are examined.