If she's currently in her 1st year, she may only live in the purchased condo 3 1/2 years. It is of course unlikely, but she may find that dental school is not for her. It's possible that she will do a residency or specialty training at the same school, but if she goes that route, it is more likely that the best match will be elsewhere. As someone else posted, only do it if you are enthusiastic about becoming a longer term landlord. Otherwise it is hard to see how this will be even a break even proposition for you.
A few thoughts about this from a dental student's possible point of view: While it would seem logical, on the surface, that living in a parent owned home should reduce uncertainty, it is possible that it may do the opposite. There are some advantages in dealing with a third party. Repairs, problems, etc can be reported to an unrelated landlord can result in less "involvement". One can become aggravated with an unrelated landlord without guilt or lasting effect. You don't have to find "extra" time to visit with that landlord or help coordinate repairs and maintenance when something goes wrong.
Her time and energy will be strained. When you interact, it will just be as family if you do not own the condo. That has great advantages. She will also feel more freedom to change where (and with whom) she lives. That sense of freedom (especially as her schedule becomes more and more structured) can be a nice pressure release (even if she never actually moves, she would feel that she would have the power to choose).
If she has/can find a safe place to rent, that seems ideal.