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Kayla, I think what they mean is they don't want the sub-domain's files to be hosted in the public_html folder.
I don't think cPanel allows it to be changed.
I don't think you can change where the files are hosted unless you can modify apache's conf files.
If you do, you should still be able to password protect them, but you wouldn't be able to use cPanel.
You can install Joomla or whatever in a password protected area.
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