Historically, most investigations involving stress have assumed its undesirability, and deleterious effects have been identified across a variety of domains. Recently, however, researchers in management and health have differentiated between types of stress, and revealed a more complicated picture as a result. Specifically, stressors perceived as goal-relevant and manageable (i.e., challenging) are thought to increase motivation, performance, and well-being, while stressors viewed as goal-relevant but unmanageable (i.e., hindering) are believed to hamper performance and occasion maladaptive behaviors. Empirical support for this theoretical framework has accumulated in employment settings, but the model has yet to be adequately extended to higher education. The current study used a longitudinal design and multiple academic outcomes to explore the challenge-hindrance distinction in a large, diverse student sample. Students from 2 Southeastern institutions (N = 853) were assessed for challenge stress (e.g., class difficulty, high expectations), hindrance stress (e.g., ambiguous expectations, favoritism), academic self-efficacy (ASE), grade point average (GPA), hours withdrawn, and transfer intentions. Results were generally theory-consistent, as ratings of challenge and hindrance stress were associated with positive and negative academic outcomes, respectively. ASE did not moderate the challenge–GPA relationship, but emerged as an independent predictor of academic functioning. Implications for stress researchers, educators, and academic decision-makers are discussed.