The use of base64 (formally MIME-Header) encoding in the "formal" mail headers is in accordance with the Internet standard https://tools.ietf.org/html/rfc2047 to handle non-ASCII characters in the "name".
Modern mail client should "unpack" the MIME-header (base-64) encoding behind the scenes and display the name properly. I certainly see the Hebrew name of students in the "From" line in mails coming out of my servers both when using "alpine" over a terminal and in Office365 online. However, it is running WW 2.15 in Docker with an older version of Ubuntu (18.04) as the "base" OS.
Sample raw header:
From: =?UTF-8?B?15jXnCDXoNep16g=?= <student@campus.technion.ac.il>
Displayed header
From: טל נשר <student@campus.technion.ac.il>
One possible issue is that the email client you are using is having trouble with the encoded data.
Another possible issues could be some change to the Encoding module of Perl between these two versions of Ubuntu.
Note: The change to do this was in https://github.com/openwebwork/webwork2/pull/973