Kotter becomes the new vice principal and the Sweathogs think they can get away with anything they want. When they tie up Carvelli and Murray, Kotter gives them detention and and they decide to quit school and get real jobs.
Barbarino gets his own apartment and the Sweathogs think they have a new hangout. Barbarino tells them they are only welcome at his apartment when he invites them over. Offended by this, the Sweathogs storm out of his apartment.
Carvelli offers to sell the Sweathogs his car so they tell him about the time they bought a car from Barbarino's uncle. While waiting at the hospital for the car, the Sweathogs see Uncle Louie wheeled in on a gurney after a car accident.
Buchanan High gets a new student, Beau DeLabarre from New Orleans, who uses his southern charm to hit on several girls including Juan's girlfriend. Juan strikes back, then Beau sets him up with a girl who has a jealous husband.
Carvelli brings in an X-rated film and asks Epstein to show it for the guys. Meanwhile, Julie prepares to show a sex education film to protesting parents. The two films get mixed up and the parents see the X-rated film.
The students are told as part of their biology requirement they're going to have to dissect a frog. And Arnold refuses to do it. He even protests by trying to take the frogs. He is told if he doesn't do it, he will get a failing grade and he's asking the other Sweathogs for support.
Freddie rewrites Woodman's version of the school anthem. A big-time recording artist hears him singing it and decides he wants to use it on his next album. But Woodman opposes the idea of the school song going commercial.
Vinnie selfishly buys himself a new camel-hair coat for Christmas. He feels it makes him stylish. So to him it's a tragedy when a couple of hoods steal it from him. Will the coat crooks be caught or a Christmas lesson taught?
Barbarino is frustrated because he doesn't get a good job at the hospital. So he is excited when he has to take a pregnant woman to her room. But the elevator breaks with them in it and she goes into labor. Now he has to deliver the baby.
Mr. Woodman's niece, Kelly, babysits for the Kotters one night when Epstein comes by looking for Mr. Kotter. He finds Kelly instead, they become acquainted, and they eventually move in together, to Mr. Woodman's horror.
Freddie and Juan compete in the school talent show, but Carvelli woos the judges so he can win the competition. So Horshack and Beau become alternate judges and fill in when the other judges are unable to fulfill their duties.
Arnold and Mary express their love for each other, then Arnold learns his mother married a blackjack dealer in Atlantic City, and now he has to leave school and the woman he loves. So Instead of leaving, Arnold asks Mary to marry him.
Epstein has a job prospect, but Washington unknowingly takes the job before Epstein gets a chance to interview. Their friendship is in danger, and they decide to settle their differences through a fight at the local spa.