Why does filing 1098-T lower my return, when I paid more in tuition than I received 'scholarship/grant'?

[sbear]

I am a graduate student receiving some tuition benefit from the University. I heard many different things regarding filing 1098-T so I thought I'd ask a question here.

I uploaded my 1098-T to my Turbotax account, thinking it wouldn't do anything, since I had about $3400 paid to school (as reported in Box 1 of 1098-T) and $2900 received as 'scholarships/grants' (as reported in Box 5 of 1098-T). 

I have 2 questions:

1. Including my 1098-T reduced my return by 1/3 of what it used to be. I have definitely paid more in tuition than I received from the school, so I didn't actually make income from it. Why is the return lower?
2. My 'scholarship/grants' was not actually scholarship, but it was tuition benefit. As far as I know, tuition benefit does not count as income since I don't see the money come through in my bank account. Why did it get reported as a scholarship?

Please help. Thank you!

[sbear]

Actually, never mind. I went through with the software online and as soon as I said Yes to "Were you working on one of the following degrees: Associates, Bachelors, or Graduate" it brought the return back to the original amount.