One after another, the shocks and indignity of old age have come to this tiny 102-year-old farming community near the Illinois border.

The bank and motion picture theater went in the 1930s. The brick elementary school was closed down in 1967 in a consolidation move by the county. The Postal Service last year withdrew mail carrier service, and a few days ago the town's beautician died, reducing the number of community businesses from eight to seven. The sole restaurant. The Country Kitchen, still operates - but only because townspeople took up a collection to pay its fuel bill several years ago.

Now, a community of 105 homes and 259 people is facing what could be the final, fatal blow to its fragile existence: a federal order to install a sewage treatment system that complies with the Water Pollution Control Act, the sweeping clean water legislation approved by Congress in 1972.

The plan under study would cost $669,000 and the town's share would be $186,000 - a sum that would nearly bankrupt the town and place hardships on many of the residents. Even if the town could borrow the money, whic is not yet certain, officials doubt that many of the predominantly old, retired residents could pay the estimated $400 hook-up fee or the $21 a month per household it would cost after that.

"When the school went, a lot of people thought Ambia was dead," said Town Board member John McIntyre, 26, "We tried to keep things going. Now we feel like the Environmental Protection Agency has just picked out a spot on the map and said, 'You will have a sewer system.'"

Until 1975, officials in Ambia never knew they had a problem. That's when they were informed that some of the town's homes had septic tanks whose effluent could run into a storm sewer which eventually could carry the wastes into a catch basin, which, when it overflowed, could contaminate a tiny creek. But according to Robert Marko, deputy sheriff, insurance representative, farm manager and leader of the campaign to stop the sewer system, to this day no onsite government inspection has every confirmed this connection.

But in 1975 the State Board of Health in Indianapolis, under the 1972 federal law, directed Ambia to "Proceed toward construction of a needed sewer system. The town board contracted with Clark, Dietz, an Urbana, Ill., engineering firm, which recommended building a municipal sewerage treatment plant. Of the $669,000, the federal and state governments would pay $482,900, leaving Ambia with a bill of $186,100.

Despite letters from the Town Board describing the financial hardships of building the system, the attorney for the Division of Water Pollution Control of the State Board of Health told the town in April that "Congress did not specifically address the situation which might exist if all the alternatives were in fact beyond the means of a municipality."

"I see no way they can implement any such system," said Brian Danley, project engineer for Clark, Dietz. However, he noted that the 1972 act requires towns and cities to reach strictly established requirements for discharging wastes from sewage systems by July 1 of this year.

The Environmental Protection Agency, which has responsibility for implementing the clean water law, has urged towns to look for "cost-efficient" solutions. But Charles H. Sutfin, director of EPA's water division in Chicago, conceded that a number of small communities have suffered financial hardships. He said that his agency has authority to fine town boards that have not compiled by July 1 but added it was "doubtful" this would happen in Ambia.

For the citizens of the town, as for those in dozens of other small communities faced with baffling new regulations from Washington, the situation has raised fresh questions about the town's ability to survive.

So far, Ambia has managed to grow old with dignity. Its scattered, white clapboard houses are neat, with abundant flowers in window boxes and lawns beneath large old trees. Main Street, only five blocks long, still boasts a post office, filing station, meat and grocery store and restaurant. Signs in front of the post office limit parking there to five minutes, even though Ambia at midday is not exactly jammed with traffic.

The surrounding fields have some of the best soil in America and the corn is like a thick green wall in mid-July.

Beneath that surface though, Ambia is poor. Few of the 259 residents own any of the rich farmlands, and 4 of 10 receive Social Security checks. The last new building - the parsonage for the Methodist church - was erected seven years ago. "Nobody's going to move in and build here because there's nothing to build to," says Marko. Houses sell for $10,000 to $12,000, and one woman says she has had hers for sale for eight years.

Signs of dilapidation are creeping in. The lumber company buildings are deserted and the grain silos are unused.

The delicate balanced between survival and extinction was evident in the sharp protests lodged by elderly citizens when water charges were raised from $2 a month to $4. The sewer costs worry the elderly here even more.

In the last letter she wrote to her son before she died here last week at 89, Mae Totherow said she was concerned that the sewer system would strain her small financial resources.

And Pearl Smith, 84, does not see how she can pay such a sewer bill. "I'm against it," she said definitely and told why: she gets only $189 a month in Social Security and a few dollars more in interest from her $2,000 burial policy. Other residents say they will leave Ambia if the sewer goes through.

State and federal authorities still hope a compromise can be reached. Ambia has been told it "might" be eligible for a federal community development grant to cover its share. Also, Joseph Stallsmith of the Indiana Stream Pollution Control Board said authorities will inspect water conditions next week to see if the septic tanks of Ambia are polluting nearby streams.

Marko, for his part, is still confident that "Ambia will be here forever."