A student and/or parents may not necessarily know about a grandparent-owned 529 account that names the student as the beneficiary, and if they did know a grandparent account owner may not cooperate in disclosing the current value. Where are the instructions from CSS saying that such an account and its value need to be reported under section ES?
IF the grandparent account owner requests that the distributions go directly to the school, yes there will be a paper trail. But the grandparent has other options, including having the distribution made payable to the beneficiary, who will then (presumably) make payment to the school - no paper trail for the school to see.