Low cost, Suitable USB key style FPGA development kit for students

These are the two common solutions:

BeMicro: http://www.altera.com/b/nios-bemicro-evaluation-kit.html

De0-Nano: http://www.altera.com/education/univ/materials/boards/de0-nano/unv-de0-nano-board.html

BeMicro is the most compact solution, since it fits in the PC like a USB stick. This is perfect if you only need to work with the fpga itself. However, in you'd like to have I/O features and/or connecting to any external device, I'd rather have De0.

If you search with your local distributors, you'll certanly find other third party kits.