AUSTIN, Texas

The University of Texas at Austin is pulling out of the National Merit Scholarship Program to focus on needs-based financial assistance.

The university -- second only to Harvard in the number of merit scholars enrolled -- said budget pressures caused it to end its participation in the merit-based program, which awards scholarships to top high school achievers.

Colleges nationwide are struggling to meet higher demand for financial aid amid fewer resources from states and their own endowed scholarship funds.

“The financial constraints brought about by the economy on families and the university require the redirection of resources to ensure accessibility to UT Austin by all qualified students, regardless of ability to pay,” the UT Office of Student Financial Services said in a statement Tuesday.

The university will redirect the scholarship money to financial assistance programs designed to help students who have a hard time paying for tuition and fees. It had 281 National Merit Scholars enrolled last year.

Over the last decade, nearly every state has started or expanded politically popular “merit aid” programs that reward students with high SAT scores or GPAs, even those whose families could afford college costs.

But the economic downturn, and the surge in demand for need-based aid, is causing a number of institutions to rethink that trend.

The National Merit Scholarship program is a hybrid, run by a nonprofit and supported by companies and individual universities. Students advance to the semifinal round based on the scores on the PSAT exam, taken by about 1.5 million students each year. About 16,000 are selected as semifinalists, and based on other application materials such as high school grades and essays, 8,200 receive awards.

The initial phase of the selection process has drawn criticism from the National Association for College Admission Counseling, which argues scholarships shouldn't be awarded on the basis of test scores alone.