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What, if any, tax break could my grandmother receive from giving the gift? Does it make any difference to her whether she gives it to
us or directly to the school?

Neither party will realize a tax break by receiving or giving a gift. The benefit of a gift is the absence of tax liabilities, provided the gift meets certain requirements. Bummer, huh?

Your idea of using the LLC is a good one. In that case, I would recommend that the gift be given to you and your wife, and not directly to the school, especially since the gift amount will be less than $10k. You can then claim the LLC for the expenses you payed towards higher education (within the requirements, of course).

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