Are these answers reviewed by CPAs or Enrolled Agents before being made “Recommended Answers”?!!
A scholarship portion not on a 1098-T that is used to pay for non-qualified education expenses is reported as Other Incone but categorized as a scholarship which is then included in Line 1 with a SCH notation. It is unearned income used to offset the standard deduction along with any other earned income. However taxable scholarships are taxed at the trusts & estates rates, NOT as self-employment (with FICA).
ONLY If the student has any other taxable earned income not reported on a W-2, and it exceeds $400, (NOT including taxable portion of scholarships/grants) might it be considered self-employment income. For example a student that receives a scholarship or “stipend” in lieu of work performed then they should either receive a W2 or a 1099-MISC. This income would be taxed as regular EARNED income. If student received a 1099-MISC then it would be self-employment. (NOTE: Federal work-study pays you just like any other job, so the income is subject to federal and state payroll taxes and should be reported when you file your taxes. FICA taxes (social security and Medicare taxes) are exempt if you're enrolled for 6 or more credit hours or are working on campus.)
Please consult a tax professional who is knowledgeable with education expenses, scholarships/grants and federal education credits and deductions, so that your student is not overtaxed!
