"The money went directly to the students account (bank account number is on the distribution as the students)".
That sounds like the plan administrator is treating that bank account as yours, not the student's. The 1099-Q shows you as the recipient. Box 6 is correct. You have three choices: 1. Enter it on your return (recommended), 2. request a corrected 1099-Q from the plan administrator or 3. just report it on the student's return and hope you can explain it if question by the IRS (unlikely).
You then say "The Student paid Tuition, Room & Board and Books for an unqualified school (not an "eligible institution"
Q. Who claims the income and in what amount?
A. Who depends on which of the three choices you take. The amount is all of the box 2 amount on the 1099-Q. It's taxable income and subject to the 10% non qualified distribution penalty, because it was not used at an eligible institution.
Q. Who claims the expenses?
A. Nobody. It was not paid to an eligible institution.
Q. Is Student Eligible for LLC
A. No. It was not an eligible institution.
