Quantum mechanics uses the word degenerate in two ways: degenerate energy levels and as the low temperature ground state limit for states of matter. The electron degeneracy pressure occurs in the ground state systems which are non-degenerate in energy levels. The term "degeneracy" derives from work on the specific heat of gases that pre-dates the use of the term in quantum mechanics.
In 1914 Walther Nernst described the reduction of the specific heat of gases at very low temperature as "degeneration"; he attributed this to quantum effects.  In subsequent work in various papers on quantum thermodynamics by Albert Einstein, by Max Planck, and by Erwin Schrödinger, the effect at low temperatures came to be called "gas degeneracy". A fully degenerate gas has no volume dependence on pressure when temperature approaches absolute zero.
Early in 1927 Enrico Fermi and separately Llewellyn Thomas developed a semi-classical model for electrons in a metal. The model treated the electrons as a gas. Later in 1927, Arnold Sommerfeld applied the Pauli principle via Fermi-Dirac statistics to this electron gas model, computing the specific heat of metals; the result became Fermi gas model for metals. Sommerfeld called the low temperature region with quantum effects a "wholly degenerate gas".
Also in 1927 Ralph H. Fowler applied Fermi's model to the puzzle of the stability of white dwarf stars. This approach was extended to relativistic models by later studies and with the work of Subrahmanyan Chandrasekhar became the accepted    model for star stability.