One more thing to consider in the realm of taxes:
If the student is a dependent (according to the IRS) on your tax return, their income might end up being subject to the “kiddie tax” (I.e. your tax rate). Before you decide which path to take, please investigate this angle. A key factor in this determination is not whether you claim them as a dependent, but rather whether they provide more than half of their own support, not counting the 529 withdrawal (I.e. can they be claimed on your taxes.).
Hth