The word upaniṣad is derived from the verb sad (1, 6, P) with two prefixes upa and ni and a suffix that converts the verb to a substantive without any change. It is defined to be in feminine gender, and the word also is the same as the substantive (since the first case singular declensional suffix is null). The prefix upa means near, and prefix ni means low, beneath. These two prefixes indicate an attitude of the student who sits close to the teacher but at a lower level. The verb sad has several meanings – to go, destroy, and to wear down. Thus the word means that which destroys ignorance, that makes the student know (Brahman) and wears down (the students habituated patterns of thinking and behavior). This explanation is based on Śaṅkar’s introductory commentary to an upaniṣad.
Technical: upa + ni + sad + kvip = upa + ni + sad + 0 = upaniṣad. The suffix kvip is a code, decoded it yields a null suffix but by the addition changes the verb to a substantive. Note that when the initial consonant s verb is preceded by the vowel i of the syllable ni, it changes to ṣ one of the many grammar rules.