It depends. If the student wrote a paper as part of their Master's thesis and then built upon that as part of a PhD thesis, then that's a clear citation. If the paper is specifically a part of the.
This can be a problem due to the requirement by journals that manuscripts contain only unpublished and original data. However, generally, a thesis or dissertation consisting of original, previously unpublished research that has been made available by your home institution does not prevent you from publishing. Rather, journals will consider.