During the schools career day, Mr. Kotter and the Sweathogs meet a Mr. Takahashi, who offers Gabe a job with his company at three times his teacher's salary.
Julie's sister from Nebraska visits and enrolls at Buchanan. She wants to be in Gabe's class and develops a fondness for Epstein...much to Julie's dismay.
With the approach of Sadie Hawkins Day, where the girls ask the guys to the school dance, everybody, including Horshack, has a date - everyone but Barbarino.
A student teacher joins Kotter's class only to find that normal teaching methods don't work with the Sweathogs. Then she adopts Kotter's style only to find out that it doesn't work for her.
To get into the Christmas spirit, the Sweathogs give a homeless man a shave and a new suit. But after he shows up at the Kotter's Christmas party wearing his old clothes, he tells them he's a bum, but he's a happy bum.
Juan's younger sister is enrolled in Kotter's class and Arnold is immediately attracted to her, but so is Vinnie, and this drives Juan crazy. Freddie is also in a romantic mood and Kotter sees it as an opportunity to teach the Sweathogs about love.
The Sweathogs join the school newspaper and investigate the break-in at the principal's office. During their investigation, they discover some shady happenings at Buchanan High School.
Kotter's father travels 1,400 miles to see him and to see what he does at school. While the senior Kotter observes his son teaching about the Great Depression, he tries to take over the class and tell stories of living through that time.
Horshack takes on the role of Cyrano de Bergerac for the school play. But when the other Sweathogs rank on him, he gets upset and runs away. Now, since nobody can find Horshack, Barbarino has to go on stage in his place as Cyrano.
The Sweathogs visit a radio station and get introduced on the air. When Freddie gets his turn to talk, he proves to be a big hit and develops a large fan following, but the other Sweathogs become jealous of his success.
With Kotter away on a teacher's conference, the Sweathogs decide to spend quality time with a pregnant Julie. However, Julie is not so thrilled with all the attention from the Sweathogs.