Occupied? That is, occupied by students (2,3)
I believe the answer is:
in use
'occupied?' is the definition.
(I've seen this before)
'that is occupied by students' is the subsidiary indication.
'that is' becomes 'ie' ('i.e.' can be a synonym of 'that is').
'occupied by' is an insertion indicator.
'students' becomes 'nus' (I've seen this in other clues).
'ie' going around 'nus' is 'inuse'.
(Other definitions for in use that I've seen before include "Currently employed" , "prevailing" , "Being employed - unavailable" , "Current" , "Engaged" .)