It's not the source of the money that is either qualified or non qualified; it's what it is spent on. For example: you get a $15,000 Pell grant in 2013. You are an under graduate student and spent $5000 on tuition and fees & $1000 on books. The rest of the money is spent on room & board and other living expenses. You have $9000 of taxable income (taxable scholarship). Since that is less than the 2013 filing threshold of $10,000 (assuming you cannot be claimed as a dependent by someone else), you are not required to file a tax return.
There is a tax “loophole” available. The student reports all his scholarship, up to the amount needed to claim the American opportunity credit, as income on his return. That way, he can claim the tuition credit on his return. He can do this because that much tuition was no longer paid by "tax free" scholarship. You cannot do this if the school’s billing statement specifically shows the scholarships being applied to tuition or if the conditions of the grant are that it be used to pay for qualified expenses.
Using the above example: instead of reporting $9000 as taxable income, you report $13,000. You can then claim $4000, of qualified expenses paid, toward the tuition credit.
But, you said you " lived solely off of student loans". Loans and grants are not treated the same.
