All income must be reported for exactly what it is. TO do otherwise would be fraudulent in the eyes of the IRS. So if the scholarships exceed all qualified education expenses, nobody qualifies for education credits of any kind. Also, in the case where scholarships exceed the qualified education expenses, it's the student that reports the education stuff even though you are claiming them as a dependent on your return. That's because it's the student who will pay taxes on the excess scholarship money not used for qualified education expenses.
