Word 2007 saves in a new format that is incompatible with previous versions. Follow these instructions to save files in the old format by default.
Change your word default document type to be compatible with teachers and students
Click the Office icon in the upper left corner of the Word window . From the window that pops up select Word Options at the bottom.
Click on the save option on the left side of the Windows Options window
Change the "Save files in this format: from "Word Document(*.docx) to Word 97-2003 Document (*.doc).
Click on OK in the lower right corner and you are all set.
Note: documents that you have saved prior to this will need to be opened and "saved as with this Word 97-2003 Document (*.doc).