@Hal_Al can you assist here?
@bill_321
I believe there is a way around this although I am not an expert. Suppose your child's "qualified educational expenses" are $10,000 for tuition and $5000 for room and board and other allowances. And suppose the child has a $10,000 scholarship from school. What you can do is treat the $10,000 as paying for half the tuition plus the room and board, leaving $5000 of tuition uncovered. You then withdraw $5000 from the 529 plan and it is tax-free because it is treated as paying for tuition.
But @Hal_Al will be able to advise you further.
