The student will apply for an education credit if applicable using her 1099-Q and 1098-T.
You are responsible for the tax (if any) from the distribution taken in your name.
If you and the student agree, she can lower the expenses she claims by the amount of your distribution which would make your distribution Tax-Free.
Tax-Free distributions are not reported on a tax return, so simply do not enter the 1099-Q into the program. Keep the 1099-Q and the receipt for the matching expenses (whether tuition or Room and Board) with your tax file.
Make sure the student does not use the same expenses for her distribution or scholarships. (If she is applying for a credit, have her report the additional assistance, in the amount of your distribution, in the "Expenses and Scholarship" section under Deductions & Credits)
According to the IRS:
“Generally, distributions are tax free if they aren't more than the beneficiary's AQEE for the year. Don't report tax-free distributions (including qualifying rollovers) on your tax return.”
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