choosybean,
The short answer is Yes, scholarship income not used to pay qualified educational expenses is considered unearned income taxable to the student. Qualified expenses are detailed in IRS publication 970 (https://www.irs.gov/forms-pubs/about-publication-970) and room and board are not on that list.
Now there is perhaps a bit of good news and a further bit of bad news:
Good news: While you cannot claim the American Opportunity Credit on your 2020 tax return, you or your daughter may be able to claim the stingier Lifetime Learning Credit which is also detailed in Publication 970. This would only be the case if there were actual qualified expense (Box 1 of the 1098-T plus required books and the like purchased for courses). Read through chapter 3 of Publication 970 thoroughly to determine if such expenses do qualify for the credit. It will depend on the details of the scholarship's terms.
Bad news: Unfortunately your daughter also gets an additional kick in the teeth from the scholarship income because it is considered unearned income and any amount above $2,100 is subject to the so-called Kiddie Tax reported on form 8615 (https://www.irs.gov/forms-pubs/about-form-8615). This income is taxed at the parent's tax rate, not the child's.
