How to create group work channels in Microsoft Teams

I suspect that I already know the answer to this question but I'm trying to check if I am correct. The Class Team support documentation for Microsoft Teams states that I can use channels in Microsoft Teams for group work and group projects. I fear that there is a terminology mismatch here and that by 'group work' and 'group projects', Microsoft means 'team work' and 'team projects'... as in all members of the team are also members of any group channel.

I am trying to create work groups of say 5 students who can work together on a group task in their own channel in the classroom team of say 20 students (something teachers do day in and out). A key aspect of this is that other students who are not in that group must not be able to see the work that these students are working on, but the teacher is still able to monitor each channel. The Blackboard LMS that we use at our institution allows student groups to be created that work in this way, but I'm feeling that Microsoft teams is unable to do this, and that I would instead have to create multiple teams for each student group and then manage multiple team sites... urgh messy. 

So I'm clarifying that you can't;

1. create channels and add specific members of a team to that channel
2. create subteams within a larger team (to support group work within a classroom)
3. create protected groups within teams