The Lower Merion School District - accused earlier this year of spying on its students with webcams - has agreed to settle the case out of court.
The Board of Directors has offered to pay Blake Robbins $175,000, which will be placed in a trust, $10,000 for Jalil Hassan and $425,000 for plaintiff's counsel.
In a statement, board president David Ebby said the decision was related to an agreement it had signed with its insurer, Graphic Arts, to cover more than $1.2 million of the fees and costs associated with the case so far.
"Although we would have valued the opportunity to finally share an important, untold story in the courtroom, we recognize that in this case, a lengthy, costly trial would benefit no one," said Ebby.
"It would have been an unfair distraction for our students and staff and it would have cost taxpayers additional dollars that are better devoted to education. We also wanted to be sensitive to the welfare of the student involved in the case, given the possible ramifications of what would have been a highly-publicized trial."
The case arose after it emerged that the school had been spying on students at home using the webcam on their school-issued webcam. Fifteen-year-old Robbins was warned that the school had evidence of him behaving in an inapprorpriate manner at home.
Two months ago, the US Attorney's Office decided not to press charges against the school on the grounds that there was no criminal intent. The school revised its policies to include a promise that it would not engage in any remote monitoring in future.
"I want you to know that had concerns about privacy been brought to the Board without legal action, they would have been addressed effectively and immediately as well, without additional costs to taxpayers," said Ebby.
"I know it may be difficult for some to believe - especially in an era when the sensational often trumps the rational, but it is true."