What are the main performance differences between varchar and nvarchar SQL Server data types?

I’m working on a database for a small web app at my school using SQL Server 2005.
I see a couple of schools of thought on the issue of varchar vs nvarchar:

1. Use varchar unless you deal with a lot of internationalized data, then use nvarchar.
2. Just use nvarchar for everything.

I’m beginning to see the merits of view 2. I know that nvarchar does take up twice as much space, but that isn’t necessarily a huge deal since this is only going to store data for a few hundred students. To me it seems like it would be easiest not to worry about it and just allow everything to use nvarchar. Or is there something I’m missing?