Yeah, the kiddie tax thing starting in 2012 put a whammy on the taxable scholarship thing. It has nothing to do with families trying to hide large income producing investments in their kid’s names.
I disagree that R&B should be QEE. Sleep away college is a luxury that most students in this country don’t get. Most students commute to CCs, technical colleges or local 4-year publics. The tax code shouldn’t subsidize luxuries IMO, just enough to help kid’s get a college education. I kind of don’t like that large tuition amounts at expensive privates are QEE. Expensive privates are a luxury too.
ETA: The purposes for which taxable scholarships are considered earned income certainly suit the taxpayer, not the IRS, but the kiddie tax, you’re right.