James only applied to art schools, which is a surprise considering that he and Link used to spend hours talking about college but art school never came up as an option.
James tells Ellen he's going to attend the Academy of Arts in Germany because he got a fellowship (which makes it free). Ellen is destroyed.
As a way to avoid the emotional breakdown that she feels is imminent, she starts kissing James. He's crying, too, and one thing leads to another, and they have sex.
Ellen is blissful. James is immediately worried about pregnancy, even though he used a condom. (You can't really blame him, though, knowing that he's the result of an unintended pregnancy in an illicit affair.)
Ellen is suddenly afraid he'll forget all about her when he goes to Germany. She wants him to bring the picture he drew of her so he'll remember her "interesting qualities."
As Ellen walks home she pictures her future, when she's all grown up and more confident, and she visualizes that everything is going to be okay.