Yes, she can make as much as she wants, as long as she doesn't use the money for her own support. What matters is how much of her own support she pays for, not how much money she makes. Support includes clothing, entertainment, meals, transportation, etc. It's not just rent and tuition. What is she going to do with all the money that she earns or takes out of her inherited IRA?
No matter how much income she has, it probably won't come anywhere near tuition and the cost of a dorm. But you haven't given any amounts. If she's at a low-cost state school and she has expensive tastes her income could end up being more than half of her total support.
