1. If the rent is not more than what the school charges for room and board, it would be an education expense you can allocate to the 1099-Q.
2. No matter who opens an account, distributions should be made by the student or transferred directly to the school so that the 1099-Q is issued to the student. If it generates taxable income, the student would need to report that income.
As long as the funds were used to house the student, supply a copy of the rent and relating expenses if applicable such as meals and incidentals, (a reasonable statement from the student should suffice) to the grandparents for their tax file. As long as the distribution was used for room and board for the student, the 1099-Q does not need to be entered onto anyone's tax return.
Once an expenses is allocated to a distribution, that expense cannot be used again. For example, if this grandparent made a distribution and allocates it to room and board, another relative could not also make a distribution from a different account and claim the same room and board expense against their distribution.
If a distribution generates taxable income, the person issued the 1099-Q must claim that income which is one of the reasons why it should be distributed by the student to the student or school.
IRS Pub 970
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