It interrupts a term at Oxford, engendering much mirth (8)
I believe the answer is:
hilarity
'mirth' is the definition.
(I know that mirth can be written as hilarity)
'it interrupts a term at oxford' is the wordplay.
'interrupts' is an insertion indicator.
'a term at oxford' becomes 'hilary' (an academic term at the University of Oxford).
'it' inserted into 'hilary' is 'HILARITY'.
'engendering much' acts as a link.
I am not very happy about this link. Some or all of it may belong to another bit of the clue.
Can you help me to learn more?
(Other definitions for hilarity that I've seen before include "Laughter" , "fun" , "Unrestrained mirth" , "Gaiety" , "Great amusement" .)