The auto-created topic ("General Discussion") does not have permission level data associated with it causing misleading behavior.
1) Make sure you have never made any changes to the auto-created topic (ie never hit save on the Topic Settings screen)
2) Edit the permissions on the auto-created forum
3) Now view the topic settings. The UI will display your forum settings since no permissions exist for that topic.
But the logic actually uses the OOTB default role permissions for determining if a user has permission (and no permission exists for that topic). For instance, if you set all permissions to NONE in your forum, the topic UI appears that you have no permissions set. But if a student logs in, behind the scenes they are granted the Contributor level and will have access to the topic.