The study demonstrates on a nationally representative sample of Estonian students and university applicants (N = 4572) that although self-reported academic self-esteem is a strong and accurate predictor of school achievement, additionally rather low, not high, general self-esteem is a significant predictor of superior school performance when academic self-esteem and multicollinearity is controlled for. Two compensatory mechanisms—defensive pessimism and self-protective enhancement—may explain the paradox of low self-esteem: academically successful students have a more critical view of themselves and students with more modest academic abilities compensate for their academic under-achievement by elevating their general self-esteem. Children start to use self-protective enhancement but from age 12 to 14 they also start using defensive pessimism to protect themselves from the consequences of failure.