The password for the next level is stored in a hidden file in the inhere directory.
Since the file is hidden, simply run a ls -a to find hidden files.
bandit3@melinda:~/inhere$ ls -la total 12 drwxr-xr-x 2 root root 4096 Nov 14 2014 . drwxr-xr-x 3 root root 4096 Nov 14 2014 .. -rw-r----- 1 bandit4 bandit3 33 Nov 14 2014 .hidden bandit3@melinda:~/inhere$ cat .hidden pIwrPrtPN36QITSp3EQaw936yaFoFgAB
The password to gain access to the next level is pIwrPrtPN36QITSp3EQaw936yaFoFgAB