1098-T Box 5 Greater than Box 1

Hello,

Both of my children have 1098-T's where Box 5 is greater than Box 1. My daughter received about $4,000 back from FAFSA and used about $2,500 for a new laptop and books. My son received about $3,000 back and used about $2,500 also on a new laptop and books. My understanding is that they both have to pay tax on the remaining amounts they have refunded? Do I put the 1098-T forms on my return, since I am claiming them as dependents, or do they put the 1098-T's on their returns?