Both sentences are correct, actually, although your thinking is sound when you say that 'I'll look for a job' is a short action happening in the middle of a longer, future action.
I think you might not be aware of the definition of 'to study' that refers to a long term action.
'Study' can mean the task of learning some information, or spending some time doing the work of learning.
I have to study Spanish tonight.
I studied the whole chapter of that book.
'Study' can also mean to be a student.
She wants to study in London.
After high school I will study at college.
This second meaning refers to a longer term action so it fits your criteria for being a correct usage in this sentence.
When you say that 'while I'm studying there' is a tense simplification of the future I think you are confused. 'I am studying' doesn't mean the same thing as 'I will be studying, so one is not just a simplification of the other.
Your example, 'While I'll be studying there' doesn't mean 'during the time when I will be studying there'. The sentence, 'While I'll be studying there, I'll look for a job.', actually means
Even though I'll be studying there, I'll look for a job.
This article explains the use of the word 'while' better than I can.