You can specify multiple ORDER BY fields in your SQL statement. Something along these lines would get you the data in the right order:
...ORDER BY college, student_id

Once you've got that, you could set up your output loop so that it compares the current value of college to the one in the previous record; if it's different, you print a header with the new information. Something like this (untested):

my $college_last ='';
while (@row = $sth_report->fetchrow_array) {
  # assign $student_name etc.
  print "<h1>$college</h1>" if $college ne $college_last;
  $college_last = $college;
  # print the actual record contents
}
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