It sounds like the student is claiming the distribution (1099-Q) and paying the tax on that distribution if applicable.
If this is the case, you would enter the 1099-Q on the federal portion of student's TurboTax and there would be no other reporting necessary.
The income is carried forward to her state return.
The Grandparents (as owners of the account) needn't report anything relating to the distribution if the 1099-Q was issued to and is claimed by the student.
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