I don't see where, above, that we have yet determined whether any of her 1099-Q earnings ($1396) are taxable or not.
If the whole $8004 was used for educational expenses, including room and board; then yes, she is not required to file either state or federal.
Since $1396 is more than the $350/$1100 filing requirement (for unearned income), she may be required to file if any of the distribution is taxable. Furthermore, even if the taxable amount is less than $350, she has to file if the 10% penalty comes into play
