Harry wonders if he and Luna are hallucinating. He joins in the conversation about Hagrid's absence and then silently wonders what's going on if Ron can't see the horses. Harry follows Ron and Hermione into the Great Hall and sits down with Neville and Nearly Headless Nick. They notice that Hagrid isn't at the staff table and wonder if he's still on his mission for Dumbledore. Then, they notice Umbridge at the staff table.
Hagrid's absence tells Harry outright that things are going to be very different this year, while Umbridge's presence signals that Fudge has put a pawn at Hogwarts to continue his work of discrediting Harry and Dumbledore.
Professor McGonagall leads in the first years and sets the Sorting Hat on a stool. A rip in the brim opens and the hat begins to sing. Its song tells the story of the founding of Hogwarts and how at first, the different Houses worked in harmony. After a few years, however, each founder tried to rule alone, and things only calmed down after Slytherin left. The hat says that it's required to sort students, though it worries doing so does more harm than good. It closes by saying that the students must unite within Hogwarts because of what's going on in the outside world, and if the students don't unite, the school will crumble. Nearly Headless Nick notes that the hat has given advice before in difficult times.
In addition to setting up a system in which good and evil fight more broadly, the Sorting Hat's song says that the way that Hogwarts is set up encourages students to see people as fundamentally different and unknowable, not as friends and allies—and also not as complex beings who can share multiple, sometimes contradictory traits at once. This again shows how fear and discrimination can be a part of the very fabric of society and be very hard to fix, as it's so normalized and to most, likely doesn't seem like a problem.
When the sorting is over, Dumbledore announces the start of the feast. Hermione and Nick discuss the Sorting Hat's warning, and Nick suggests that since the hat lives in Dumbledore's office, it likely picks up on what's going on. At the end of the feast, Dumbledore addresses the students. He introduces Professor Grubbly-Plank and Professor Umbridge, the new Defense Against the Dark Arts teacher. As Dumbledore continues, Umbridge says, "hem, hem" and interrupts him. Dumbledore looks shocked for a moment but then sits down. Umbridge stands and addresses the students as though they're small children. She's a boring speaker and drones on about discouraging "progress for progress's sake" and abandoning inappropriate customs. The students talk amongst themselves and, except for Hermione, barely listen.
The way that Umbridge addresses the students as though they're young children suggests that she takes a very different view of education than most other professors at Hogwarts. Speaking to them in this kind of tone conveys that she doesn't think them able to think for themselves or move through the world competently. In turn, this allows Umbridge to show the students that she's the one in charge and the person tasked with molding their educational experiences at Hogwarts. Her words also show that she’s essentially a politician and bureaucrat, using smooth and easily forgettable language to hide her true intentions.
Dumbledore leads the school in applause for the speech before resuming his announcements. Hermione darkly says that Umbridge's speech means that the Ministry is interfering at Hogwarts, a fact that neither Harry nor Ron picked up. As Dumbledore dismisses the school, Hermione and Ron call for the tiny first years. Harry smiles at them until he notices students staring at him with horrified looks. He makes his own way to Gryffindor Tower, thinking he should've expected this kind of treatment. Neville meets him at the Fat Lady's portrait and gives him the password to enter.
Hermione's ability to pick out what Umbridge meant in her speech speaks to the power of close listening and critical thinking skills, both of which are skills that Hermione learned through practice. Harry continues to feel alienated and discredited in a place that he usually thinks of as home.
Harry and Neville climb up to their dormitory and when they enter, Dean and Seamus stop talking abruptly. Harry wonders if they were talking about him, and if he's paranoid. They greet each other, and then Seamus carefully says that his mother didn't want him to come back to Hogwarts. She's been reading the Prophet and believes what it's saying about Harry and Dumbledore. Enraged, Harry changes and climbs into bed. Seamus asks Harry what happened when Cedric died, but Harry tells him to read the Prophet and move dormitories if he thinks Harry is a liar.
Again, Harry's concern that he's paranoid suggests that he's questioning his reality and whether or not he's seeing things as they truly are. The role of the Daily Prophet in this conflict shows how effective Fudge's choice to lean on the paper has been, as it's clearly a great way to sow discord at Hogwarts and in general society.
Seamus storms out and is on his way to find McGonagall when Ron arrives and learns what's going on. Growing red in the face, Ron says he believes Harry and threatens to give Seamus detention if he's rude to Harry. Seamus leaps into bed and rips his curtains closed, and Ron asks if anyone else has issues with Harry. Dean shrugs that his parents are Muggles, and Neville says that according to his gran, the Daily Prophet, not Dumbledore, is the one losing its touch. The boys fall silent and Harry wonders how many others will think he's crazy. He wonders if Dumbledore has been experiencing this all summer.
Just as Harry chose to not ruin Ron being a prefect for him, Ron is now able to return the favor by using his power to stand up for Harry and make Harry's life more manageable. By also standing up for Harry, Neville marks himself as an ally and shows Harry that his community is expanding. Harry's ability to question whether Dumbledore's been struggling with the same thing indicates that Harry is starting to come of age emotionally and develop empathy for others.