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An "Extension" student is usually someone who has not gone through the traditional process of applying to the university. Instead, they take a limited number of courses, which can sometimes (depending on the school) later be applied to a degree if they choose to matriculate. Basically, they get some of the benefits of being a student without having to go through the competitive admissions process.
At my school, it also includes people in the evening degree program and students who want to attend the UW for the summer only (not during the regular academic year). And our Education Outreach/Extension program is also responsible for online courses and the distance education program (correspondance courses).
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