This chapter explores the effects of classmates on educational outcomes, highlighting how peer interactions influence student performance, aspirations, and behavior. The analysis shows that peer effects can be positive, negative, or neutral, depending on group composition, academic ability distribution, and social dynamics. While high-achieving peers can inspire others, disruptive students may hinder learning. Empirical studies confirm that grouping strategies impact long-term outcomes, with non-linear models offering more accurate estimations than traditional linear-in-means approaches. The chapter underscores the importance of carefully designed educational policies that leverage peer effects to enhance learning while mitigating unintended consequences of social interactions.