File Compression

It is possible to select multiple files, or to download an entire folder from the site, and it would be zipped up to then be downloaded. However, this can fail if there are too many files, or too much data itself to be zipped.

This could imply that compression doesn't occur on the server, since it would take a long time to process the compression/decompression of files at will, especially when files sync frequently. Given the number of files that sync each second from the millions of users, this would add a lot of processing to each sync, thus slowing the service.

Could you clarify why the data compression on the server end is important for your workflow and needs? Does it directly affect how the students would work on their files? 

Regarding the protection of files, there are multiple articles on the site referencing the usage of encryption to protect them and the compliance standards that Dropbox follows.