Your daughter can deduct the interest as if she paid it. This is one of the few exceptions to the usual rule that a taxpayer can only deduct expenses that the taxpayer paid. Publication 970 includes this:
Interest paid by others.
If you are the person legally obligated to make interest payments and someone else makes a payment of interest on your behalf, you are treated as receiving the payments from the other person and, in turn, paying the interest. https://www.irs.gov/publications/p970#en_US_2022_publink1000298880
Here, the "you" who is obligated to make payments is your daughter.
You (mother) can't deduct the interest because you didn't pay it, and the grandmother can't deduct the interest because the student was not her tax dependent when the loan was taken out. But the student can deduct the interest.
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