Research finds that parental characteristics of classroom peers, such as education, income, matters for achievement. We use rich survey data provided in the Early Childhood Longitudinal Survey to explore whether mother’s and/or father’s education creates spillover in the classroom and why the parental education of classroom peers matters. We distinguish between several possible channels of effects: parental involvement in the classroom, home inputs that lead to better readiness for kindergarten throughout the school year and/or at the start of the school year, and influence on teacher inputs. We find that observable inputs cannot explain the spillovers from peer parental education. However, our model produces testable implications if peer effects derive through unobservable readiness for school throughout the year, based on the proportionality between the effect of own and peer parental education.