UC Cyclery is real close to campus. There is also a bike shop on campus. Personally, I would not buy your FIRST bike online, and I haven't had the best of luck with craigslist. Go to a shop, or a couple of shops, try out several models to see what you like.
A nice looking bike has a greater chance of being stolen on campus. Lock it up properly, or bring it into class with you.
If you're looking to go offroad, most entry level mountain bikes are ~$500. In this price range, bikes with V-brakes (rim brakes) usually have better drivetrain components than those with disc brakes.
Some shops will be blowing out models at the swap meet, and it's this Sunday.