Thank you, @Hal_Al! I tried out your clever trick, and it looks to work great. If I understand correctly, your idea is to set the tuition amount to be just enough to be offset by the scholarship, so the scholarship doesn't accidentally offset anything else.
I also appreciate your advice on considering having my nephew include some of the income on his return.
Haven't looked at this year's 1098-T yet, but I am pretty sure its Box 1 won't be exactly 13,500 + room & board + books since 1) Tuition was more than just the scholarship, so the university received additional funds from my 529 to cover it, and 2) room & board & books were not charged to the university account but were purchased separately. I do understand that I have a limit on how much I can use the 529 plan to pay for room & board, based on the university's estimated cost of attendance.
Please let me know if it looks like I'm misunderstanding anything. In any case, thank you again!
