Ttyjfyk

#!/bin/bash

if [ ! $# -eq 2 ];
then echo "You have not inputted the correct amound of arguments.
usage: $0 file user
Where file is the file to search
and user is the user to find" 
fi

if [ ! -e $1 ];
then echo "You have inputted an invalid filename.
usage: $ file user
Where file is the file to search
and user is the user to find"
fi

let count=0

for line in `cat $1`; do
count=`expr $count + 1`
if [ "$line" == "$2" ]; then
 echo "$2 found on line: $count"
 exit 0
else
 echo "Would you like to insert this username? y/n"
 read answer
 answer=`echo $answer | tr [a-z] [A-Z]`

 if [ "$answer" != "y" ]; then
 cat "$answer" >> "/classlist.txt"
 else
 echo "That's fine. Program ending ..."
 exit 0
 fi
fi
done

my "for in" loop doesn't do what it should do. the loop should take data from the text file (btw the text file is just a list of names broken up by line breaks) and assign it to the variable "line." when the "for in" loop ends, it should reassign the "line" variable to the next line in the text file. However, this is not the case. the script only ever reads the first data entry in the text file. did I use the loop incorrectly?

Short answer: Change your exit 0 to continue

To be sure your for loop is working correctly, you can do a short test:
count=0
for line in cat $1
do
count=expr $count + 1
echo $line
done
echo "Counted $count lines"

If that gives you all the lines in your file, and the accurate count, then your for loop is working correctly. (seems correct. Not the acceptable standard, but I prefer this format myself)

The first issue is, this:
if [ "$line" == "$2" ]; then
echo "$2 found on line: $count"
exit 0

The exit 0 says exit the script (i.e. do nothing more.)
You could just eliminate this line all together as it will drop out of the if and hit the done which will read the next line. Or you could change it to continue which will return to the top of the loop and read the next line.

The second issue is:
if [ "$answer" != "y" ]; then
cat "$answer" >> "/classlist.txt"
else
echo "That's fine. Program ending ..."
exit 0
fi
If you really want to exit the script, your exit 0 is fine. If you want to break out of the loop, then this should be a break. If you want to go to the top of the loop to read the next line, it should be a continue.

To see how the different ways of exiting the loop affect your code, add the line echo "Finished loop" to the end of your script. Experiment with the break, continue, and exit 0 options to see which one prints "Finished Loop"