As a final remark, you say you "have been told to not let anyone else know or there will be trouble for it". It is not quite clear how this request was phrased and what is meant by "trouble", or especially, who the "trouble" would be directed at. If this is meant to be "trouble" for you you are right to consider this quite shady, as apparently, your superior is not going to take responsibility for the arrangement1 on the off-chance that anyone complains, and maybe also that the number of hours you amassed is substantial enough that someone might indeed bother to investigate.
1: At the very least, by describing the arrangement as a way to retroactively make up for the due payment the student missed due to unforeseen administrative issues. IANAL, but while probably a violation of procedures of some kind, it seems unlikely anyone would bother to create consequences as there is no tangible damage if the payments are made up for eventually.