So that's why I was confused.... if you're N7... you basically just graduated West Point, but you might still be considered a rookie in the actual military?
Not exactly.
West Point is an officers training academy. Young people enter West Point for a career in the military just the same as one enters university. US students graduate as commissioned officers in the US Army, if I remember correctly.
Interplanetary Combatives Training is based upon the US Navy SEALS BUD/S training, and similar such elite courses around the world. Anyone invited to ICT is a proven combat veteran who is now being invited to join the best of the best. (Remember Shep's talk with Vega about James' invitation?) If one completes the first stage of ICT, they gain the military vocational code N1. This means this person is a serious badass and they'd be universally respected among Alliance personnel. (Even getting invited to ICT is badass and worthy of respect.)
Progressing up the levels of proficiency, from N1 to N2 and so on, is simply a matter of completely progressively more demanding ICT training. An N7 has achieved the peak proficiency and is the ultimate badass in the Alliance military. Shepard was this ultimate badass from the opening of ME. That's why he was about to become a Spectre.