I think people do not take the issue of privacy and security seriously enough. Even though I am a huge fan of Google Docs, I would not use it for business or professional work. Besides the fact that you are letting another company own your intellectual property, it is just too easy to accidentally let a private document escape into the public via email or sharing.
If your rogue document deals with a specific student this would be a major violation of privacy and might rightly get you sued.
This isn’t just theoretical. If David Petraeus and Paula Broadwell had not trusted GMail, he would likely still have his job. One would think that the director of the CIA could have used something like AbiWord to set up a more secure communications channel.