@CrunchyCookies the simple answer to your question is that the student ALWAYS reports the scholarship income (box 5) of form 1098-T. That income can be reduced dollar for dollar by any qualiified educational expenses (box 1).
if Box 5 exceeds Box 1, the student reports that as income on his tax return.
If Box 1 exceeds Box 5, then any tax CREDITS gets reported on your tax return as well, unless you are the dependent of someone else, in which case they could be eligible for any tax credits. If you are a dependent of someone else, you are not eligible for any educational tax credits.
