The EDUCAUSE Learning Initiative has released Privacy Considerations in Cloud-Based Teaching and Learning Environments.
Here's an excerpt:
In this white paper, we outline the privacy issues relevant to using cloud-based instructional tools or cloud-based teaching and learning environments for faculty members and those supporting instruction. Our discussion of how teaching and learning in an increasingly technological environment has transformed the way we interact and interpret FERPA will help inform various choices that institutions can consider to best address the law, including policy and best-practice examples. We highlight practical suggestions for how faculty members can continue to use innovative instructional strategies and engage students while considering privacy issues. Finally, this paper discusses ways to further explore and address privacy locally and includes a comprehensive resource list for further reading.