Student Category doctype allow you to classify student based various categories. In Institutions, there may be fee concession for some categories such as Handicapped students, foreign, nationals, reserved category by the government etc.
To create Student category go to:
Setup > Student Category > New
We can create new student category by adding a name and save it
You can select the Student Category while making the Fee Structure and accordingly the student from the selected groups can be filtered out while making the Fee Schedule.
Next: Student Group