OTTAWA, Ont.-The Canadian federal government and 325 First Nations have agreed to settle a class-action lawsuit, seeking reparations for the loss of language and culture brought on by Indian residential schools, for $2.8 billion.

The case was initially filed by the Tk'emlúps te Secwépemc and Shíshálh Nation in British Columbia because day scholars were left out of the 2005 residential schools settlement with the government. Day scholars are survivors who were forced to attend the institutions during the day but went home at night.

Like residential schools, day schools aimed to assimilat...