COVID-19 has had a profound impact on the mental health and well-being of students. An effective method that can enable students to cope with difficult times is to help them realize their inner potential. Following the stimulus-organism-response model, this study developed a theoretical framework that deepens our understanding of an environmental stimulus (fear of COVID-19) that is experienced by students; struggle within the organism (learning stress, learning involvement, and academic concerns); and the psychological response (psychological well-being). The findings clarified how the fear of COVID-19 affects the psychological well-being of university students and revealed the moderate role of academic self-efficacy in this process. Some systematic practical advice was provided to higher education institutions to develop effective interventions to protect the mental health of college students and establish strategies to promote their inner potential.