If my son's grants and scholarships are more that his tuition does this disqualify him from the American Opportunity credit? Can he use the excess as income to qualify?

You have no qualifying expenses if they were paid with the scholarship so there’s no education credit.  But if you used the scholarship money for other purposes like room and board you could use paid tuition cost as a qualifying expense and claim the credit that way.  The scholarship amount would then be reported as income on your son’s return if he has a filing requirement.