Final answer:
The process described is called 'tracking,' a system that categorizes students into different educational paths based on various criteria including academic performance and potential.
Step-by-step explanation:
The process in which applications are reviewed based on academic performance, completion of rigorous coursework, and extracurricular activities is known as tracking. This is a formalized sorting system that categorizes students into different educational pathways or "tracks", such as advanced or low achievers, often based on test scores, previous grades, or perceived ability. While tracking can help tailor education to student abilities, it may also perpetuate inequalities by limiting opportunities for some students based on these classifications. Academic merit and potential are key factors in this system, reflecting a student's past performance and expected capability for future academic success.