Sports agent Norby Walters paid University of Pittsburgh defensive back Teryl Austin $1,500 down and $250 a month to retain him as an agent, Austin reportedly told school officials.

The payments stopped when Austin's performance fell and his rating as an NFL prospect dropped, according to the Atlanta Constitution, which quoted NCAA sources describing Austin's statements.

Walters then encouraged him to tear up their contract, the sources quoted Austin as saying. Walters declined comment on the report.

Pitt suspended Austin and running back Charles Gladman for their dealings with Walters and associate Lloyd Bloom, both of whom are being investigated by a federal grand jury in Chicago.

According to the Constitution, NCAA sources said the players will be declared ineligible for their upcoming senior seasons. Pittsburgh Athletic Director Ed Bozik said the school will appeal to the NCAA to reinstate Austin . . .

Texas Attorney General Jim Mattox privately advised Southern Methodist University officials that severance payments to three former athletic officials who resigned after a football scandal may have to be returned, the Dallas Times Herald reported.

Mattox is required by law to monitor charitable trusts to ensure they are administered properly. He told SMU officials through an intermediary that money paid as part of termination agreements to former athletic director Bob Hitch, former football coach Bobby Collins and Hitch's assistant, Henry Lee Parker, may have to be repaid to the university.

Terms of the agreements were made public last week in a United Methodist bishops' committee report. The report said three former members of SMU's board of governors negotiated agreements to pay Hitch, Collins and Parker a total of $863,013 to end their university contracts. About $150,000 has been paid . . .

Advantage International, a District-based sports marketing firm, announced it will handle the marketing and financial services of two former North Carolina basketball stars, guard Kenny Smith and forward Joe Wolf. Smith was picked sixth overall in Monday's NBA draft by the Sacramento Kings, Wolf 13th by the Los Angeles Clippers.