Over the past 30 years, research on how college impacts student development has continually pointed to the peer group as perhaps the dominant change agent during the college years. A college student's peers act as a reference group, or an environmental source of sociocultural norms in the midst of which a student grows and develops (Clark & Trow, 1966). A large body of empirical evidence has been collected over the years to support this conclusion. Given the importance of understanding interpersonal peer environments in the context of racial diversity in student development, this study focuses on the college friendship group--a student's best friends on campus--and its effect on students over time. The specific questions addressed in this study are: (1) To what extent does the interpersonal environment created by the academic abilities and aspirations of the friendship group affect intellectual self-confidence and degree aspirations in college? and (2) What role, if any, does the racial diversity of students' best friends affect the development of intellectual self-confidence and degree aspirations? Data for this longitudinal, quantitative study were collected during the 1996-1997 academic year at the University of California, Los Angeles (UCLA), a racially and ethnically diverse, public research university. A sample of 2222 third-year students who were previously surveyed as freshmen in 1994 (using a general freshman survey were surveyed again in the 1996-97 school year with an instrument specifically designed for the study.