While the litigation has certainly marred Trump's public image for months, the settlement may not affect him much financially. Forbes explains that Trump may be permitted to write-off the fee on his tax return.
"Most business settlements are fully tax deductible," says Forbes contributor, Robert W. Wood. "The only part that arguably may not be here is the $1 million in penalties. But barring express non-deductibility commitments, many penalties can be deducted, too."
A settlement would end a dispute that dogged Trump throughout his presidential election campaign and led to one of the more controversial moments of his run when he claimed the judge overseeing two of the cases was biased because he was of Mexican ancestry.
Lawyers for the president-elect have been arguing against students who claim they were they were lured by false promises into paying up to $35,000 to learn Trump's real estate investing "secrets" from his "hand-picked" instructors.
There are three lawsuits relating to Trump University: two class actions suits in California and a case brought by New York Attorney General Eric Schneiderman. All of the cases would be covered in the possible settlement, the person said.
The source asked not be identified because the agreement was not yet final.
Schneiderman has said over 5,000 students across the country were defrauded out of about $40 million.
The $25 million settlement agreement would include roughly $4 million to resolve Schneiderman's claims, the source said. Lawyers for the students were not planning to seek attorneys fees, but reimbursement for costs.
Trump's attorneys could not immediately be reached for comment.
U.S. District Judge Gonzalo Curiel, who is presiding over the two California cases, had urged both sides to settle.
Trump said during his election campaign that Curiel, who was born in Indiana to Mexican immigrant parents, could not be impartial because of Trump's campaign pledge to build a wall on the U.S.-Mexico border to control illegal immigration.
A trial in one of the cases was scheduled to begin on Nov. 28 in U.S. District Court in San Diego.
"As Attorney General Schneiderman has long said, he has always been open to a settlement that fairly compensates the many victims of Trump University who have been waiting years for a resolution," Eric Soufer, a spokesman for Schneiderman, said in a statement.
Trump has said he did not "hand pick" Trump University instructors, but that marketing language used was not to be taken literally. He has said most students gave the classes high ratings.
A court hearing in the case was set for Friday afternoon in San Diego.