I understand your predicament, and this isn’t an unusual scenario. It’s strictly an issue of when you paid your expenses.
As you note, since the school reported your 2017 spring semester payments for qualified tuition and related expenses in 2016, the scholarship amounts reported for 2017 aren’t offsetting those costs for 2017.
All the IRS can “see” – since Form 1098-T is submitted to the IRS from the university – is that your 2017 scholarship is greater than your 2017 qualified tuition and related expenses, thereby making the excess appear taxable.
And, it is taxable, since the IRS is looking at tax year 2017. If the 2017 spring semester expenses had been paid in 2017, the offset would be complete, and there’d be no taxable income.
If you did, in fact, pay your 2017 spring semester expenses in 2017, but they were reported on your 2016 1098-T, then you should contact your school immediately to request amended Forms 1098-T for both years.
