The Canadian government is pursuing settlements with former residential school residents who suffered student-on-student abuse and were left out of the compensation process, CBC News has confirmed.

Crown-Indigenous Affairs Minister Carolyn Bennett will formally announce Tuesday that the government will set up a separate stream outside of the Independent Assessment Process (IAP) to help those former students receive compensation.

The payouts will go to former students who were abused by fellow students, and whose claims were rejected or did not receive fair compensation.

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A government source said the government has identified at least 240 former students who could now be eligible for compensation. Their compensation will be paid out of federal money already budgeted for the residential school file; the department isn't sure yet how much the settlements will cost.

The Toronto Star first reported the news Monday night.

According to government figures, the tribunal-like model of the IAP has resolved nearly 98 per cent of claims, but some cases don't fall within its parameters.

The government isn't throwing out the old process, said the source, but it is acknowledging it wasn't fair to all residents.

The IAP also has been criticized for the high bar of proof claimants had to meet when it came to student-on-student abuse. Claimants had to prove that they reported the abuse to a school staff member, or that a staff member should have known it was happening.

The government source said the settlements will cover previously filed cases, not new ones, and won't introduce any new evidence.

'Tragic and unacceptable'

"The abuse suffered by former residential school students is tragic and unacceptable," said Bennett in a statement seen by CBC News.

"We will continue to work with survivors and their representatives to bring closure to this dark and tragic chapter in Canadian history as we continue on the shared path of reconciliation with Indigenous peoples."

Senator Murray Sinclair, the former chairman of the Truth and Reconciliation Commission, has called student-on-student abuse one of the untold stories of Canada's residential school legacy.

He told the Canadian Press back in May that sex was often used as a tool of violence between the school's students, resulting in an intergenerational legacy of trauma that continues to haunt families to this day.

"Many people didn't want to talk to [the commission] about student-on-student abuse because they were often still living in the community with their abuser," he said.

Bennett's announcement comes the same day survivors of the St. Anne's residential school in Fort Albany, Ont. are expected back in court.

The survivors have described the school as a "veritable house of horrors where, for generations, indigenous children suffered unspeakable physical and sexual abuses" — but they have been denied compensation because of a lack of documentation.

The survivors are still trying to obtain documents they believe were withheld during the Independent Assessment Process.

The plaintiffs want Ontario's top court to order a review of all St. Anne's compensation claims adjudicated before the government disclosed thousands of documents from a 1990s criminal investigation by provincial police.

It is estimated that about 150,000 Aboriginal, Inuit and Métis children across Canada were removed from their communities and forced to attend residential schools.