Good question @jack.meyer and by no means an unintelligent one. The Custom material is the type the Rhino material library was originally built on. It’s simple with just those four texture channels and some sliders. This material type is also what the legacy Rhino Renderer is set up to use and since we left that in as an option when Rhino Render (RR) in v7 was updated, these Custom materials may still be needed. With that said, you can use them with RR v7 or convert any of them to the new Physically Based (PBR) material using the Type drop down menu in the Materials panel. The texture maps get carried over along with any settings and you can then explore the extra texture channels etc. in PBRs for a much wider range of effects.
The material templates like Paint, Metal and Glass are all PBRs under the hood too just so you know. They only have less options and like any other material type can be converted to a PBR if desired. I personally start any material with one of the templates or a PBR if I know I’ll be using my own texture maps. Or start with a Library material > convert to PBR and go from there. PBR materials can also come from external sources in the form of Zip folders with textures imported into Rhino 7 or via the Adobe Substance material plugin in the PackageManager. PBR is the closest thing to a universal material definition between apps as it’s based on the texture maps and it offers the greatest amount of control. Have your students use the template materials or the library and as they want to do more they can convert them to PBRs.
The biggest confusion I see with my students is that they don’t remember to switch library material texture maps from WCS to mapping channel 1 and adjust the repeat values when they use custom texture mapping for an object. Properties > Texture Mapping has a message explaining this but it is often over looked. This is separate topic from PBR but a common one I thought I’d mention.