After about a month of living alone at the boarding school, the man with the wooden stump begins cleaning the rooms of the buildings, signaling the return of the boys and teachers. Mr. Mell informs David that he is to meet Mr. Creakle, the school's headmaster, who seems intimidating. Mr. Creakle emphasizes that he is a very strict and harsh man, even hinting that he once banished his own son for challenging him. When David dares to ask if he can remove the sign before the boys return, Mr. Creakle begins to laugh madly, scaring David so much that he runs out of the room.
David meets Tommy Traddles, a large, good-natured boy who finds David's sign hilarious, although not in a mean way. In fact, all of the boys, gloomy from having to return, don't even pay much attention to the sign, to David's delight. David also meets the much anticipated James Steerforth, whom he refers to as simply Steerforth. The first thing that Steerforth does is take all seven shillings that Peggotty and his mother gave David upon his departure--under the pretense of "taking care of it." He convinces David to buy wine, biscuits, almond cakes, and fruit for the whole room. As they are eating, the boys tell David that Mr. Creakle is very brutal and will hit any boy in the school except for Steerforth--who says that he would certainly hit Mr. Creakle back if it ever happened.
School begins the next day, and Mr. Creakle's brutality is in evidence. The one good thing about the beatings is that the sign is removed from David's back, for it gets in the way of Mr. Creakle's switch. Steerforth continues to be David's idol, earning more of his respect than even the two masters of Salem House, Mr. Sharp and Mr. Mell. David is even willing to wake up early to recite stories such as Arabian Nights to the older boy at his request. The one thing David dislikes about Steerforth is the way he treats Mr. Mell, who has been very kind to David.
One day, when Mr. Creakle is gone and the boys are being particularly rowdy, Mr. Mell tells them to sit down but Steerforth defies him. Steerforth then makes fun of him for having his mother in a poor house, which was revealed to him by David, who had been told when Mr. Mell picked him up. Mr. Creakle comes in and, unsurprisingly, sides with Steerforth, resulting in Mr. Mell's departure. David feels extremely guilty about the whole exchange but gets over it quickly, trusting in Steerforth's judgment and not wanting to get on his bad side like Traddles, who stands up for Mr. Mell and earns Steerforth's disfavor in return.
The only other event that stands out in David's mind from that year is his visit from Ham and Mr. Peggotty, who brought him lobsters, crab, and shellfish. When David learns he has visitors, he thinks it might be about his mother, which brings him to tears until he learns who has come. He introduces them to Steerforth, and they like him. Steerforth is acting in a very charming and heartening manner. David almost tells him about little Em'ly but is too shy, afraid that Steerforth will laugh at him.
Vacation finally comes, and David goes home. As Mr. Barkis, the carrier, is driving him back, David lets him know that he gave Peggotty the message. However, Mr. Barkis says that nothing has come of it. David arrives home to find both of the Murdstones gone and only Peggotty, his mother, and her newborn baby. They spend a happy afternoon together, sitting in front of the parlor just like old times. When David asks about what Peggotty thought of Mr. Barkis' message, she scoffs and says that she would never leave David and his mother, both of whom are relieved to hear this. The only unhappy part of the evening is when Peggotty asks about David's aunt, Miss Trotwood, and says that she would be more inclined to forgive him now that he has a baby brother. This brings Clara to tears, and she accuses Peggotty of being jealous of and rude to the Murdstones. The two make up, however, for Clara does not wish to fight. The sound of a carriage signals an end to the night.
David's stay at home becomes completely miserable, and the Murdstones, Miss Murdstone in particular, do not hide their eagerness to have him leave. Miss Murdstone even keeps a calendar and counts the days until he must return to Salem House. David knows that simply his being in the room with the Murdstones causes his mother great stress, so he tries to avoid them. This leads to them rebuking him for having a "sullen" attitude. Thus, he is forced to sit with them, afraid of even moving for fear of being reproached or even beaten. The day of his departure arrives none too soon. As he is driving away in the coach, he hears his mother call to him. He looks back and sees her holding up his baby brother, not a hair on her head even stirring. This is the last memory of her he will have.
David's birthday comes soon. He is called to the parlor, and he goes eagerly, expecting a package, but instead Mrs. Creakle informs him that his mother has died. He experiences the deepest, most sincere sorrow that he has ever known. The only advantage is that he gets more respect from the boys as a result of this tragedy. He goes home for the funeral and is taken to the funeral parlor by Mr. Omer, a jolly, fat man whose family is quite happy and loving, so much so that David can only look at them in wonder. It is there that he learns that the baby died as well, making him despair even more. He is fitted for his mourning suit and then brought back home, where he finds Mr. Murdstone in a melancholy, almost angry mood, Miss Murdstone controlling and detached, and Peggotty, who has been staying up with his mother's body all night, absolutely distraught.
After the funeral, David gratefully finds himself completely neglected by the Murdstones and is happy to have permission to go to Yarmouth with Peggotty, who has been given a month's notice of her release by Mr. Murdstone. On the carriage ride, Mr. Barkis is constantly flirting with Peggotty, nudging her and asking if she is "pretty comfortable." After he has dropped them off, Peggotty reveals to David that she is thinking of marrying him, and David wholeheartedly approves. David is excited to see everyone, especially Little Em'ly, who has grown much more into a woman. She teases him and refuses to be as affectionate as she was before, which pains him. It is only at the end of his trip that she agrees to let him kiss her and to sit next to him in the parlor. Mr. Barkis visits every night and leaves little gifts for Peggotty. One day, they announce that they are going on a holiday together with David and Little Em'ly. On the trip they get married. The night before David leaves, he stays in the couple's house, and Peggotty informs him that she will visit him weekly and that he will always have a room in her house.
David returns home to even more neglect than before. Although Peggotty does come to visit him once a week, he is never allowed to visit her. One day, Mr. Murdstone informs him that David will be sent to work for one of Mr. Murdstone's friends, Mr. Quinion, in a counting house. He will have to work for his own food and pocket money, and the Murdstones will provide for his lodging and laundry. David leaves with Mr. Quinion the next day, taking only a little piece of luggage and leaving his hometown behind.
One thing that is very interesting to observe during David's stay at boarding school is his intense admiration of James Steerforth. Steerforth does not do anything to merit this respect; in fact, he steals David's money by tricking him into thinking that he will keep it for him, then having it spent on food for everyone. Steerforth also is cruel towards Mr. Mell, who has been the nicest to David of everyone in the school, and has such a strong personality that even Mr. Creakle apparently does not strike him. Steerforth’s name suggests his ability to lead or “steer forth,” particularly in terms of leading David.
If it is difficult to understand why David, and even Mr. Peggotty and Ham, admire Steerforth so much, it is helpful to see the situation in terms of social status. His obviously high class background, as well as the confidence and arrogance that Steerforth exudes, tend to awe people like David, Mr. Peggotty, and Ham. His status draws admiration. This class separation is also what somehow permits Steerforth's cruel treatment of Mr. Mell and what allows David to forgive this behavior so quickly.
Another major part of these chapters emotionally is the abusive marriage of David's mother and Mr. Murdstone. Although readers may blame Clara for not protecting her son more, it is hard not to sympathize with her. Readers can now see just what Mr. Murdstone and his sister have done to the poor woman. She is no longer joyous and carefree but is instead constantly afraid and beaten down. They have convinced her that she is in need of so much change and that she is so weak that it is rude to challenge their authority and decisions. She resists but only weakly and out of motherly instinct; the only time that she can be affectionate with her son is when the Murdstones have left for the day. Her only true support is Peggotty, who sticks with her until the very end, acting as a mother figure and taking care of both Clara and David. That Clara is motionless in David’s last memory of her is a symbol of her loss of power, autonomy, and self. As for David, he has been replaced by the new baby, and now to the Murdstones he is just in the way.
Peggotty's marriage to Mr. Barkis also produces mixed feelings for David if not also for readers. Although it is good that she has found a good, loyal husband, it is easy to sense that this will not bode well for David. Her attention has shifted away from David, too. David wholeheartedly gives his blessings to Peggotty, but he knows that this now means that he will not have Peggotty there all of the time like he did before. Hope remains, and as usual, there is an advantage in the situation for David. This marriage, which will lead to the departure of Peggotty and even to a degree the death of David's mother, are spurs to David's independence, whether he is ready for it or not, and his maturation.
His independence is forced upon him by his mother’s death and then his assignment to Mr. Quinion. Like an adult, David must work to eat. He is not entirely on his own in this social system, however, for some of his expenses are paid by Murdstone and there is some expectation that Quinion’s counting house will contribute to his development.
At this point, however, it is quite evident how innocent and naive David still is. He has unquestioning admiration of Steerforth, and Dickens has done a wonderful job of presenting David’s memories as those of a child. David also has much to learn about romantic relationships, not having much to go on except Peggotty’s newfound love as a model of a successful relationship. His interactions with Little Em'ly are childlike. He expects everything to be the same as they were so long ago, not realizing that Little Em'ly has grown up into a young lady, albeit a somewhat spoiled one. David has to learn quickly that she is no longer the little girl she was. David may not be ready to venture into the world on his own, but he is going anyway.