A test case in the High Court will decide whether students from other European Union countries are entitled to student loans in the United Kingdom.
A claim against the London Borough of Ealing by a European student has been selected as a test of the government's policy that although EU students can have their fees paid, loans are off limits.
Ealing Council said: "A claim by way of an application for judicial review has been made against the council on whether the claimant is a person who is an eligible student entitled to a student loan. The Department for Education and Skills is an interested party in the proceedings. The case is a test case as there are similar claims against other authorities and the case is yet to be heard and decided upon by the court."
Details of the claimant have not been released. A hearing is expected in December or January.
The dispute centres on the residency status of EU nationals studying in the UK. Duncan Lane, director of advice and training at Ukcosa, the council for international education, explained: "According to DFES guidance, an EU national is not eligible for a student loan unless they can show that they have settled status in the UK."
To be classed as settled, he said, the students would have to apply to the Home Office. DFES guidance, he added, says students will not normally be granted settled status.
The legal challenge hinges on the argument that all EU citizens have no time limits on their right to remain in the UK and can therefore have settled status.
Meanwhile, the confusion over residence status has left local education authorities unclear as to whether student support can be offered to entrants from other EU countries.