Ms McCluskey had contacted university police multiple times to report threats from Melvin Shawn Rowland before he killed her in 2018.
The 21-year-old track and field athlete had dated Rowland for a few weeks until she discovered he had lied about his identity and was a convicted sex offender.
Rowland, 37, killed himself as police closed in after Ms McCluskey was found fatally shot in a car near campus housing.
Her parents sued the university for $56 million after officials claimed that their own investigation showed there was no way they could have prevented the killing.
An independent commission set up by the university then found they had missed a string of warning signs before the murder.
“The university acknowledges and deeply regrets that it did not handle Lauren's case as it should have and that, at the time, its employees failed to fully understand and respond appropriately to Lauren's situation,” said university president Ruth Watkins.
“As a result, we failed Lauren and her family.”
The university will pay the family $10.5 million and donate $3 million to a foundation in her name to improve campus security.
An indoor track facility will also be built and named after Ms McCluskey as part of the settlement.
“We acknowledge and applaud the many positive changes that have occurred at the University of Utah since her death and we hope they continue,” said Ms McCluskey’s mother, Jill McCluskey.
“This settlement is important for many reasons. It addresses how Lauren died, but also honours how she lived.”