How to create an environment in which students can report teacher-student sexual harassment?
I refer you to the Student Conduct Administration &amp; Title IX:
Gold Standard Practices for Resolution of Allegations
of Sexual Misconduct on College Campuses report from the Association for Student Conduct Administration. While this report is specifically about responding to complaints about student-on-student sexual harassment, many of the "best practices" described there apply more generally. 

Some specifics from that document:


To better understand the climate on your campus, there is a list of "Questions to Ask Your Campus" on page 19 of the document mentioned above. These questions may help you identify the problems and a way forward for your specific college. (There is no one-size-fits all resolution to this problem.)
Find out if it is possible (e.g. for your Office of Institutional Research, if you have one) to conduct campus-wide climate surveys to understand whether existing efforts to inform students of sexual harassment policies and procedures are effective. If (as you suspect) they are not, this survey will serve as a baseline against which to judge the effectiveness of changes in how you present and disseminate these policies.
How comprehensible are your policies to your student body? Would your students feel the need to involve a attorney or a parent in order to understand the policies and procedures related to filing a sexual harassment claim? 
Make it easy to report sexual harassment. A campus should have several avenues through which students can report (phone, in-person, email, and online form, for example). 

To reduce the barrier to making a "formal complaint," make the student's first interaction as simple as possible:


  For example, if the first conversation includes something like, “You’re not going to want to go before a hearing board of three
  older faculty members that you might later have as instructors and discuss intimate details of your sex life,” that student is not likely to file a formal complaint.

Help students understand that even if they are not prepared to make a formal complaint, they can still get some relief from the situation (with "supportive measures" as they are known in Title IX). For example, in your scenario, the student should be allowed to change classes (and she should understand that she can transfer to another class) even if she is not ready to proceed with a formal complaint.
According to the April 2014 Q&amp;A Guidance on Title IX from the OCR, the school's written Title IX grievance procedures should explicitly include "sources of counseling, advocacy, and support" for students. Does your school's policies include these? Are they adequate?


Another useful document is How to Protect Students from Sexual Harassment: A Primer for Schools, from the National Women's Law Center.