Yes, a scholarship not used for qualified education expenses is taxable. This is considered income. However, there is generally, no principal or interest on a scholarship. A scholarship is usually basically free money that you never pay back.
If for some you will need to repay the scholarship, you can deduct the repayment from your income in the year you repay it.
https://taxmap.irs.gov/taxmap/pubs/p525-005.htm
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