College refund

It's funny I got my TurboTax home and business today and when I got home I had something a little unexpected... a refund or credit for my daughter's college... it mentioned some sort of Grant or whatnot but my daughter was expecting it ... I said her classmates were getting checks today..she says for  covid and related expenses...

 

Some background, she is in her fourth year and her tuition was paid from her 529 account. She received 2700 back today.  I'm curious how this will get reported. I'm also concerned because 529s are allowed to grow tax-free and I believe if you overdraw you have to pay a tax penalty of some sort. However is there a way to get this money back into the 529 account? I'm not sure why they sent her a check instead of crediting it from where it came from... FYI we still have a little money in the 529 account that I was planning on allowing her to use towards her master's degree.

 

She does file her own tax return her 1099 t and q are reported on our, her parents, income tax. Where will this be reported?

 

Anyone ever run into this before and what can I expect and or what can I do if I have any options?