Okay, so I would pick a day where you and Dh can hash it out with them and make a big stink about this. That is just so ridiculous to me....she has been the grandma since the day she was born....does she need the pediatrician to tell her how that worked?!? She may not * feel* like a grandma, but she is not your children's MOM!!
I am just so mad for you. I was a young mom too, I had my first at 20, and also my mom was a teen mom when I was born. But how your MIL is acting is just so disrespectful, and not to be put up with.
Have you checked craigslist? Apartments.com is overpriced. Do you have any friends with a spare room? Trailer parks? Section 8? You are so young, I don't think getting out of debt should be your first priority here, if I can just speak honestly.
She doesnt have to be called Grandma and he doesnt have to be called Grandpa, but they are not the parents of your children. Even if you NEVER graduate from college.
This is a hill I would die on, or move out on so to speak.
That is just not worth the toxicity.
ETA: And also you should distance yourself from her as much as possible. You are allowed to say no.
PS Sorry for the forcefulness but this hits close to home for me, I am also in sales, and I also have a wacky MIL with no boundaries.
But you *are* an adult, no matter what she says. ((hugs))