He does count that as income. It was not money that was given to you/him. It was only borrowed money. Whether it paid for room & board or went into your bank account, you still have to pay it back.
If it was scholarship money that was refunded, the answer might be a little different, but probably not. Scholarships that pay for tuition, fees and books is tax free. But, scholarships that pay for room and board (R&B)are taxable income to the student. So, R&B scholarships are taxable whether refunded or not.
