I am in the same boat. I used windows and office 2003/2007 through my time while earning my BA. Now that I'm in Graduate School, I use iWork. Let me share some thoughts...
iWork has some great templets that can really be applied to a lot of papers and other things.
Word has the native .doc and .docx formats. (I work in a computer lab. We still have issues opening .doc/.docx files that were created on a mac. I have no idea why, it just happens.
In iWork, you can export as .doc/.docx. You don't really need to worry about getting your paper to them.
If formating is a problem with anything, always fall back on PDF. They can accept PDFs without a problem. Just ask before you send it.
Since I work at my Grad school as well as attend, I get some pretty awesome discounts on software. My version of office 2008 cost me little over $15.00. I downloaded a trial copy of iWork to compare the two. I can honestly say that I find office to be a pain. It takes longer to load and does this annoying thing of placing a data file in your documents folder by default. (You can move it to one or two other places only.) I actually ended up shelling out the $80 for iWork. (There is no discount since the school has no campus wide license for it.)
Try the trial. If you like it, might as well use it.