I think it is likely that you need to use the 1042-S and take backup withholding. The rate would be 30% unless the student claims something different on their W-8BEN, in which case you can rely on their certification. If that is the case, the payment would be due to the IRS by January 31, because you will file or e-file the 1042-S with one copy to the payee and one copy to the IRS with the payment. The payee would claim a refund by filing a tax return.
But I also agree that you may need some direct legal advice.
