My 7 month old German Shepherd bit me when I bonked him on the head with a rolled up towel for lunging at another dog in a group class. Do you have any guidance for us?

this is a very typical German Shepherd trait. We've bred and raised them for decades so I know exactly what you are experiencing. For many GSDs their frustration to restraint (from the leash) shows in the behavior you are seeing. The key is to stop putting him in situations that trigger this. No group classes, no walks in unpredictable areas, or interactions around dogs he doesn't know. We have a very good Leash Reactivity video on this, I've linked it below.

Separate from the training lessons from the reactivity material I teach all my dogs from puppyhood to engage with me on a verbal cue for first a food reward and then toys if they like to play. I'll link that material for you as well. (Food and Tug videos)

The hardest part for most dog owners is keeping them in a controlled environment while training through this, the more he continues to rehearse this the harder it is to fix.

Let me again stress that bonking him with a towel or using a prong or any other collar to correct him once he's already focused and/or reacting it's too late and your physical correction only amplifies his frustration. The key for now is NO group classes and teaching him a new skill set while building value for your rewards and your relationship.