The deal announced on yesterday by New York state Attorney General Eric Schneiderman would settle a lawsuit he filed three years ago, plus two class-action lawsuits in California filed on behalf of former Trump University students.
The suits allege that Trump University failed to deliver on its promise to teach success in real estate through programs that cost up to USD 35,000.
They say the program misled students by calling itself a university when it wasn't an accredited school and by saying that Trump "hand-picked" instructors.
Messages left with several of Trump's attorneys and a spokeswoman were not returned on yesterday.
Trump has strongly denied the allegations and said during the campaign that he wouldn't settle.
He told supporters at a May rally that he would come to San Diego to testify after winning the presidency.
"I could have settled this case numerous times, but I don't want to settle cases when we're right. I don't believe in it. And when you start settling cases, you know what happens? Everybody sues you because you get known as a settler. One thing about me, I am not known as a settler," Trump said at the time.
The deal does not require Trump to acknowledge wrongdoing. Schneiderman said the USD 25 million to be paid by Trump or one of his business entities includes restitution for victims and USD 1 million in penalties to the state.
"Donald Trump fought us every step of the way, filing baseless charges and fruitless appeals and refusing to settle for even modest amounts of compensation for the victims of his phony university. Today, that all changes," Schneiderman said in a statement.
He called the settlement "a stunning reversal by Donald Trump and a major victory for the over 6,000 victims of his fraudulent university."
A federal judge in California had been set on yesterday to consider arguments on Trump's latest request to delay a trial until after Trump's inauguration on January 20.
Trump's attorneys said in a court filing last week that preparations for the White House were "critical and all-consuming."
Six months ago, when they unsuccessfully sought a delay until after Inauguration Day, lead attorney Daniel Petrocelli said the period between the election and swearing-in is extremely hectic for a president-elect but that it was preferable to a trial during the campaign.