I feel your stress. I understand how hurtful it all is.
The thing is, if he wants to go to school and they cut him off, all he has to do is list a friends house as his home and he can file for Financial aid as an independent adult.
He can take his things to his friends houses and stay with them forever. If they get tired of him living off them all he has to do is keep making friends, he does not have to work, he can choose to live the life of a homeless person. My daughter did it for about 10 years. She has 7 children to show for it.
You cannot, nor can anyone else, make him do what you think is the right choice for him....he can do what he wants even if it is not the choice you want him to make.
He is an adult who is not able to understand what that means. Kicking him out sets him up to live life precariously, living with this one then that one, etc...he needs to learn how to function in life but to have a safe home to do it from so that he doesn't end up with pregnant girlfriends, aids, or some other kind of life threatening illness.
I agree he should have a job, he is not capable obviously.
He needs to attend classes and get good grades, of course.
He needs to start maturing and finding his way in life.
I would say that making some contracts with him through the grandparents might be a place to start. Such keeping his GPA above a "C" he gets he can have 6 months of insurance on the car, 6 months of tuition paid, X months of paid cell phone with all the bells and whistles BTW, I would never have a Cricket phone, he is a normal person and I would not even buy a phone for the grand-kids I am raising unless it was a normal phone.
BTW, have you considered letting him move in with them (since he is not really living with you he could store his stuff over there and go there on weekends to eat and do laundry)? He could have all the benefits and you'd have no hassles. They want to support him, let them.