You should enter the form 1098-T information on her tax return. You will have an option to enter the additional expenses when you enter the form. She will report the income on her return along with her wage income.
You are correct, you do not report anything on your tax return. If the education expenses had been more than the scholarship income, then you could report the 1098-T information on your tax return and you may have been eligible for an education credit.
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