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As an adjective, the word coed, short for coeducational, indicates an institution that teaches both males and females. However, as a noun, it can only mean "a young woman who attends college". Why is this so and how did this come about?

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It's a result of the history of education in the U.S. Early students were all male. When women were allowed, the term co-education was introduced, and women were called co-eds. –  John Lawler Oct 19 '12 at 15:58
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Never underestimate the power of sexism in etymology. –  Affable Geek Oct 19 '12 at 16:17
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I don't think it's so much that "early students were all male" but that "early colleges were single sex." I suspect it is because the idea of a woman playing a man's role is so much more jarring than the reverse, from a sexist point of view, that a "co-ed" is a woman going to a mixed-sex college rather than a "co-ed" being a woman or man going to a mixed-sex college. –  Merk Oct 19 '12 at 19:50
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@Merk You are correct: co-education meant women were suddenly welcome in men's schools. I don't know, but I think, women's schools mostly did not open to men until quite a bit later on. –  MετάEd Oct 19 '12 at 20:24

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Cornell University, one of the first universities to embrace coeducation, became a coed institution in 1870. In a 2005 book by Margaret A. Lowe titled Looking Good: College Women and Body Image, 1875-1930, the author explains using first-hand accounts by the pioneering "coeds" of the time:

But once intertwined with feminist politics (whether embraced or disavowed on campus), coeducation further threatened Cornell's decision to admit women. The feminist link painted female students with the derogatory brush of unladylike desire. Considered strident intruders, they took the heat for destabilizing gender categories—it was they who crossed into male space and therefore put their moral authority in doubt. Female students would be called "coeds"; the term "student" referred solely to men. One early Cornellian recalled, "We were called 'co-eds'...and we should have been much more touchy than we were to mind it." In a humorous column for the Cornell Era, another student recalled that on her first day in Ithaca, "a boarding house keeper, of British birth, asked me if I were a a 'co-hed.'...'Co-head'!...But the attitude of our British friend was not so far remote from that of out student brother; to both a coed (A co-head) is an anomaly, a monstrosity."

In other words, the males were called students while the females were not; they were instead called coeds. So, the sexism theory prevails.

Webster's estimated date of first use—1878—is in keeping with the above excerpt. Etymonline's estimate is off by a couple of decades. There are a few other sources that also cover this topic; but all they do is parrot the (correct) dictionary definition rather than provide any real insight into the why and how of the question.

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That's a historical account of how some students responded to the term, not a etymological account of how the term originated or why. The process of how and why the term originated falls under what etymologists call metonymy. Determining whether the driving force behind the process was some deep-seated collective ill-will toward the entire female gender, or a simple desire for a shorter word than "female student" and the fact that "coed" is catchy would require a hell of a lot more justification. –  Marcel Turing Apr 3 at 0:53

The process is called metonymy, calling the members of a set something associated with that set. A student of a type of educational system is called by the name of the system.

But this doesn't explain why only females are called by this term. Even though logically both males and females in a co-educational environment could be called 'co-eds', only females were. At the time of adoption of this word (the late 19th c), most colleges were predominately male, and for the college to become 'co-educational' the newer students who were also much fewer in number, were the females. Since the newer set is the exceptional case, the metonymy only applied to the marked case, the females.

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Again, this appears to be conjecture. While it seems logical, I'm unsure what everybody is basing this theory on. Having read John Lawler's and @Merk 's comments, I can extrapolate even further: Women in the 1800s used to attend women's colleges. However, once men's colleges became coed, some women, rather than attending pristine and pure women's colleges, chose to lower themselves by attending coed institutions thereby being branded coeds. Thus, coeds was initially a derogatory term rather than a sexist one. | To me, this theory is just as, if not more convincing than the others. –  coleopterist Oct 19 '12 at 21:46
    
@coleopterist: OK, but then what would be a convincing answer to a 'why' question? Are you looking for the explicit explanation by the person who very first used it in speech? Sometimes that is available but not often. If you can't come up with good criteria or there is no way to fulfill the criteria, then this might not be a constructive question. As to derogatory, 'coed' is unlikely to be such, rather it sounds more like a euphemism to replace harsher words that a boys club might use (I have no evidence, but I'm just trying to pursue the conjectural possibility that you suggest). –  Mitch Oct 19 '12 at 23:57
    
Surely I'm not the first person to ask this question. There must be feminists galore who have looked into this. I don't think that the story is that obvious that the answer is plain as day. Usually such theories have their origins in some written work. A more reliable source than according-to-this-chap-on-the-net will be nice :) –  coleopterist Oct 20 '12 at 5:32
    
@MarcelTuring: the law of logic is called the law of implication through definition. A 'co-educational' school means teaching both sexes in the same classes. Note that no sex is preferred in that terminology. So how come logically and literally is co-ed to be preferred for females over males? I gave an extra-logical explanation. So, to you, what is a logical explanation for preferring one sex over the other? –  Mitch Apr 3 at 12:50

The formal explanation: "The process is called metonymy, calling the members of a set something associated with that set. A student of a type of educational system is called by the name of the system." makes a lot of sense.

... as in atheletes: jocks, drive-in waitresses: car-hops, contract workers: temps, prisoners: cons, US soldiers: GIs, adolescents: teens, etc.

It is of no significance that the use of the word "coed" to identify a woman was at times defamatory, hip, sexy, or neutral. What is stated here is a verifiable answer for how female students came to be called coeds.

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In this context, men were "educated" and women were "CO-educated." That is, they were educated "alongside" men, not really in their own right.

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