College kids were enjoying pizza and beer, and paying for it all with a debit MasterCard. But this was not any debit card. The funds behind it come from student financial aid.

The card is the brainchild of Miles Lasater and Mark Volchek, who came up with the concept when they were students at Yale and turned it into a business called Higher One , which went public in 2010. Higher One reported $75 million in revenue in 2009, and is on pace to more than double that in 2010, with some 700 colleges and 5 million students on board. And the business is built around that debit card.

According to the company, roughly half of student borrowers receive aid that covers more than their tuition. Those funds are supposed to cover books, housing and living costs. Schools are required to refund that money to students, and in the past did so in the form of a paper check.

Lasater, who was a computer science major at Yale, and Volchek, who studied economics, reasoned they could streamline the process for schools and students, while at the same time making money from MasterCard transaction fees collected from merchants and debit-card fees collected from students. Schools quickly signed on, including the University of North Dakota.

“We really looked at it as a pretty reasonable win-win kind of arrangement,” University of North Dakota Vice President Peggy Lucke said.

But not everyone views it that way.

Higher One’s fees have drawn the ire of some students, like University of North Dakota senior Shane Gerbert.

“I don’t like the fact that someone’s taking money from money I borrowed,” Gerbert said.

And the money can add up. Higher One charges $20 to replace a lost card. $19 a month for account that has been inactive for nine months, and 50 cents any time a customer keys in a PIN instead of swiping the card, which is how Higher One earns transaction fees.

The company defends the fees as competitive, noting that students can avoid all fees if they use the card properly.

But is it wise to outfit students with a card that lets them access student loan funds with a simple swipe to spend on anything from books and housing to pizza and beer?

Lasater said students are capable of using the money wisely.

“The financial aid system is designed to provide living expense money as well,” Lasater said. “So it's everyday money that you use, yes, to buy food, to buy drink if that's appropriate.”

University of North Dakota student Alexandra McLaflin got her Higher One card right after her 24th birthday. She did not use all the funds for school.

“I kind of went out and spent some on clothes and shoes and went to the bar,” she said. “But most of it I did try to save for some bills.”

Not all of it, though.

“I did buy a new car,” she said. “The interest rate was a little lower than through a car dealership.”

A new car with student loan money?