The study was conducted during November and December 2006, and the participants were Taiwanese aboriginal students at five-year junior colleges in Taiwan. Five hundred students from twenty junior colleges were recruited, and completed data for 226 students were analyzed. The data were collected by scoring the responses on six instruments which measured Taiwanese aboriginal junior college students' potential social capital, racial identity development, academic outcome (expected grade) and their psychological adjustment (stress, social support, self-esteem, and academic engagement). The instruments were designed to gather information on the following: (a) potential social capital scale; (b) multigroup ethnic identity measure; (c) racial identity attitude scale; (d) perceived stress scales; (e) self-esteem scale; (f) social support scale; (g) academic engagement scale; (h) academic outcome (expected grade). This quantitative design used SPSS 12 to analyze the data. Independent t-tests, Pearson correlation coefficient, regression model, ANOVA, ANCOVA were applied in the study. Results from this study indicate racial identity affects academic outcome with the covariate of psychological adjustment. This finding contradicts previous research that racial identity cannot affect students' psychological adjustment and academic achievement in higher education. For social capital, the study provides encouraging evidence that social capital is directly, significantly correlated with academic outcomes and that students with broader social networks develop better academic outcomes. Further, when students encounter challenges and conflicts, the broader social network assets are covariates with the positive psychological adjustment to lead to the greater academic outcomes. For racial identity, a higher perception of racial identity does not directly affect academic outcome in this research. This conforms to previous research that racial identity does not have much influence on Taiwanese aboriginal college students to fit in the Han dominant academic environment.