good Q, i entered that and it was marked incorrect

Sounds a bit old-fashioned, but it should be okay.

"In the university" would be "en la universidad" as well.

Both are correct here, but have slightly different meaning.

"¿Cuál es la diferencia?"

In colloquial American English these terms are pretty interchangeable, but generally universities have a broader theme, usually offering many different fields of education. Colleges are either subject-specific sub-parts of a university, or university-like institutions with a narrower spectrum.

Americans refer to university as college. In Canada university is more academic (research and theory) , where college is for business, trades, more hands on stuff, or more career focussed.