How do I sort posts by custom taxonomy?

If I understand your question correctly, I think I may have your answer in this blog post:
https://evowebdev.com/2017/05/using-a-dropdown-menu-to-filter-a-custom-post-type-with-custom-taxonomy/

This solution specifically uses select form element auto-populated with taxonomy terms to sort CPT posts (ie, rather than presorting posts with pre_get_posts, it lets site visitors sort by the taxonomy term[s] they select). If it’s really important to pre-sort, this may not be an answer for you.

I could see it being useful, however, to allow people to select to view all courses of one of the levels.

That said, wouldn’t the following presentation occur with alpha order?

  • Course Name level 1
  • Course Name level 2
  • Course Name level 3