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In higher education, our students experience a wide range of vulnerabilities, which we define as a lack of physical, social, and emotional security. Vulnerabilities are unevenly distributed and stratified by race, gender, and socioeconomic status. What is the role of vulnerability in facilitating the development and expansion of capabilities, a core mission of higher education in many Western nations? On the one hand, a lack of resources can substantially undermine students’ abilities to learn and integrate new knowledge. On the other hand, vulnerability has been theorized as a catalyst for transformation, a condition of suffering and fragility that engenders change. Operational definitions of vulnerability in higher education need to acknowledge its dual-sided nature and potential to help and harm student growth. In this paper we ask what kinds of vulnerability facilitate and inhibit students’ development of capabilities? To guide our thinking, we analyze the life history interviews of three engineering students attending a liberal arts college in the Northeastern United States: one American student of above-average academic performance (representing the normative case), one immigrant student of color of above-average academic performance, and one immigrant student of color of below-average academic performance. Utilizing qualitative structured coding methods, we coded each interview using Walker’s (2006) capabilities list for higher education contexts. We also inductively coded instances of vulnerability that arose during the interviews, which often overlapped with one or more of Walker’s capabilities, and noted their proximity to other capabilities at that time in their lives. Coding was performed by three members of the research team using consensus coding techniques to reduce individual biases. We suggest that vulnerability acts as a conversion factor, which both enables and inhibits capability development. Vulnerability is often the product of structural factors, which distribute vulnerability unequally by gender, race, social class, and country of origin. However, the valence of vulnerability is mediated by individual agency, through which individuals may experience transformation through reframing vulnerability as personal triumph over adversity. We argue that the capabilities approach offers a better balance between structure and agency than two competing models, shame resilience theory and psychological safety. This study contributes to new ways of conceptualizing and measuring vulnerability and human development at the micro-level in universities. Higher education systems are central to citizens’ capability development, and understanding student vulnerabilities helps such systems respond to rapid societal changes.