Laddering CDs as you've outlined sounds like a reasonable plan. I couldn't really comment on the bond market right now, I'd be in way over my head
I actually have followed a very similar route to Matthies, downsizing from a house that had appreciated tremendously over the previous years into a townhouse near the school I planned to attend - although I may be attending law school elsewhere, so this property is likely to become a rental.
Setting aside the risks of a high LTV in a declining real estate market, a HELOC will have a significant tax advantage over student loans, as the interest deduction is not capped at $2500.00 like student loan interest.
My tentative plan is to take on federal student loans now, thus taking maximum advantage of any subsidized loans while in school, as well as deferring payments until graduation, and still retain eligibility for the federal IBR/LRAP programs should my employment plans change and I find myself in a public interest of government position. Once I've graduated, I can then tap into the HELOC I've already put in place at a favorable interest rate, and take advantage of the tax benefits of mortgage interest to offset my (hopefully high) income once I'm working in the legal field. This plan seems to offer maximum flexibility, allowing me to take advantage of the benefits of the federal loan program while in school yet providing an opportunity to utilize the equity in my home to gain a more favorable interest rate and greater tax advantage after graduation.