When we upgraded from 1.6 to 1.9.3, all my students and their grades disappeared also, but the database said the information was still there. Then I found out that most of the enrollments in my course were gone. I went in and re-enrolled everyone and their grades showed back up. My students (currently) only take one or two courses a year and exceeded the 180 days inactive, which was resolved but...
It sounds like your students are still visible, so that might not be the problem. In the gradebook are they looking at course totals (I haven't figured out course totals, either, though I haven't tried very hard...) or test/lesson scores?
Gradebook
Lost Grades After Upgrade
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