School spokesman Bill Mahon said the university and Paterno's estate finalized the remaining payments that were due to the longtime coach, who was fired in November in the wake of former assistant Jerry Sandusky's arrest on child sexual abuse charges.
Paterno died of lung cancer in January at age 85.
A breakdown provided by the school included: a career bonus of $3 million; an annual bonus of $425,000; the use by Paterno's family of a Beaver Stadium suite for 25 years, valued at $1.5 million; and $900,000 from television and radio revenue from last season.
The deal also pledges payments to the coach's widow, Sue Paterno, of $1,000 a month for life, and gives her on-campus parking and access to university hydrotherapy equipment.
No one answered the phone at the Paterno home in State College late Thursday, and messages for Paterno lawyer Wick Sollers and spokesman Dan McGinn were not immediately returned.
Other elements of the package include a final paycheck of $34,000; a death benefit of $51,000; a bowl bonus of $50,000 and $350,000 - payable over five years - under a 1986 consulting agreement. The university also agreed to forgive $350,000 in outstanding loans and debt. No explanation was provided regarding Paterno's debts to the school.
While the school said in a news release that the total value of the package was "over $5.5 million," added together the various elements are worth about $6.7 million.
Mahon said the trustees decided to honor the terms of Paterno's contract as if he had retired at the end of the 2011 season.
"That contract recognized Coach Paterno's decades-long contributions to our football program and to the entire university," Mahon said.
The board of trustees fired Paterno as coach just days after Sandusky was arrested, and have said a "failure of leadership" on his part contributed to the decision.
Paterno spent six decades at Penn State and 46 seasons as head coach, winning two national championships and becoming the face of the university.
Sandusky is awaiting a June trial on 52 charges for alleged abuse of 10 boys over a 15-year period, allegations he has repeatedly denied. Also charged were athletic director Tim Curley and vice president Gary Schultz, accused of lying to a grand jury and failing to report suspected child abuse. They also await trial and have denied the allegations.
The scandal also led to the departure of university president Graham Spanier, who remains a faculty member.