Refusal to receive student is picked up in letter (7)
I believe the answer is:
epsilon
'letter' is the definition.
(I know that epsilon is a type of letter)
'refusal to receive student is picked up' is the wordplay.
'refusal' becomes 'nope' (nope can informally mean no).
'to receive' means one lot of letters goes inside another.
'student' becomes 'l' (as in L-plates for learner drivers).
'picked up' says the letters should be written backwards.
'l'+'is'='lis'
'nope' enclosing 'lis' is 'nolispe'.
'nolispe' backwards is 'EPSILON'.
'in' acts as a link.
(Other definitions for epsilon that I've seen before include "Lose pin (anag.)" , "small number mispronounced, almost completely the wrong way round" , "Greek letter E" , "Greek letter - pinoles (anag)" , "character in Greece" .)