Abstract: The socio-economic background children are born into affects their development from early on. Children from higher and lower socio-economic backgrounds enter the education system with different cognitive and non-cognitive skills. Besides differences in early childhood, a child's socio-economic status (SES) can also determine how she copes with hardships at later stages in her educational career. Using the Hungarian National Assessment of Basic Competencies database and an administrative database, I look at how children from different socio-economic backgrounds change their educational aspirations after one specific hardship -- grade retention at the final years of primary school. I find that children from all socio-economic backgrounds decrease their aspirations after retention, but the magnitudes are larger for low-SES children. The post-retention SES-gap in aspirations is the highest for those children who had high aspirations before the retention. All retained children are then more likely to end up in a vocational secondary school (if attending any institution at 10th grade), and less likely in an academic secondary school, but low-SES are also less likely to attend a technical secondary school, which would still give them a high school diploma besides a vocational certificate. I attempt to establish a causal relationship between retention and later outcomes by using illnesses during the schoolyear as an instrument for retention. The preliminary IV results point to the same direction as the OLS results.