There are two divisions and four racing categories, and the NICA Rules can be a little confusing to sort out. Here is a layman's primer to get you started. For full details, or if you're having trouble sleeping, divisions and categories are covered in the NICA rulebook in section 3.
Division 1 is for large school teams, Division 2 is for small school teams and Composites. Composite teams are not allwed to grow large enough to compete in Division 1 because NICA wants to encourage the formation of school-based teams. We are a Composite team, so we are in Division 2.
I find it easiest to think in terms of your default category, and how you can upgrade from there.
The defaults are simple. 6th, 7th and 8th graders race with their grade. Freshmen and Sophomores race in (surprise!) the Freshman and Sophomore categories. Juniors and Seniors both race in Junior Varsity. No one is in Varsity by default, because Varsity racers are freakishly fast.
From there, it's an upgrade system. If your race history meets certain criteria and you want to race a faster crowd, you can petition to upgrade from your default category into JV or Varsity. For example, if you do really well freshman year, you can petition to race Junior Varsity as a sophomore. See section 3 of the NICA rulebook for details.
Composite Team Scoring
There is a new league rule in 2017 that limits the "scoring size" of a composite team to 11 riders. This is because a large composite team has an unfair advantage in the team scoring and placing, In theory composite teams start small and as they grow they result in spin-off School teams, so therefore they stay small. Historically however there have been very large Composite teams near cities where it is very difficult to ever get a "critical mass" of riders from any one school. The good news is that this is only a scoring size limit, and does not prevent us from operating as a group. It just means that for scoring purposes, we have to have sub-groups within the team. Any group of students 5 or more from the same school will be scored separately as a school instead of being part of the composite score, even though they are officially on the composite team.