Together they get a benefit, because the parent is putting in the money. It's taxed when it goes in, but when it comes out it's in the hands of the student.
There are two parts to it. First, there's the contribution part. When the contribution goes in, it's taxed, but it grows tax free. When the contribution part is taken back out it is in the hands of the parents, but they don't have to pay tax on it because they've already paid tax on it. The part that's grown is in the hands of the student, and generally speaking, students aren't earning sufficient income to pay tax. Plus there's the grant portion. So there's the return and there's the grant portion.
Does that help?