Chuck tells Dan that they're from different worlds, and that Dan, by virtue of his middle-class stature, can't afford (in so many ways) to get suspended or expelled. Chuck, by contrast, can simply have his dad buy his way out of trouble.
Despite the efforts of Serena's evil grandmother, Dan sticks it out and wins the affections of Serena at the ball. It helped that Lily stood up for him - and herself - by swallowing her pride and admitting she'd been unfair.
Blair: I've never been Bette Davis before. I'm Audrey Hepburn! Not some plain baby Jane. Chuck: We both know this is about NYU. Now it may take time, but one day you will hold that school in the palm [kiss] of your dainty hand. Blair: I'm Audrey. I'm Audrey!