No reason to not do it.
The IRS shows examples of how to max-out education credits in Pub 970.
With no regard to education, the student is getting 900.
You next enter the 1099-Q, which triggers taxable income.
next is the 1098-T resulting in her refund going down to 600.
The program stalls a bit after the 1098-T is entered since the education interview is not yet completed.
Next, the program is trying to figure an education credit.
There are situations where it may be more advantageous to claim a credit using expenses that were paid for with a 529 (1099-Q) distribution, although that might make the distribution taxable income.
Sometimes the credit is worth more than the tax.
Since she finish her first four years prior to 2023 (and may have already used the QOTC four times) the only credit she might be eligible for would be the Lifetime Learning. It is a less valuable credit and maxes out with 10,000 expenses.
Once you continue the education interview and allocate expenses for a credit, the credit increases her refund to 2,600.
According to the IRS Pub 970 page 46
"The American opportunity or lifetime learning credit can be claimed in the same year the beneficiary takes a tax-free distribution from a Coverdell ESA, as long as the same expenses aren't used for both benefits. This means the beneficiary must reduce qualified higher education expenses (QHEE) by tax-free educational assistance, and then further reduce them by any expenses taken into account in determining an American opportunity or lifetime learning credit.
Example. In 2023, during your first year in college you had $5,800 of QHEE. You paid your college expenses from the following sources.
Partial tuition scholarship (tax free) ......... $1,500
Coverdell ESA distribution ............... 1,000
Gift from parents ...................... 2,100
Earnings from part-time job ............... 1,200
Of the $5,800 of QHEE, $4,000 was tuition and related expenses that also qualified for an American opportunity credit. Your parents claimed a $2,500 American opportunity credit (based on $4,000 expenses) on their tax return. Before you can determine the taxable portion of your Coverdell ESA distribution, you must reduce your total QHEE."
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