If it is "Qualified Tuition Reduction" it is not reported and not taxed'
According to the IRS:
"If you receive a
tuition reduction for education below the graduate level (including primary,
secondary, or high school), it is a qualified tuition reduction, and therefore
tax free, only if your relationship to the educational institution providing
the benefit is described below.
You are an employee of
the eligible educational institution.
You were an employee
of the eligible educational institution, but you retired or left on disability.
You are a widow or
widower of an individual who died while an employee of the eligible educational
institution or who retired or left on disability.
You are the dependent
child or spouse of an individual described in (1) through (3) above.
Child of deceased
parents.
For purposes of the
qualified tuition reduction, a child is a dependent child if the child is under
age 25 and both parents have died.
Child of divorced
parents.
For purposes of the
qualified tuition reduction, a dependent child of divorced parents is treated
as the dependent of both parents.”
If the tuition reduction is not qualified, and it sounds like it isn't, the student needs to claim it as income.
If the class is worth 2,000 and the school gave the student a reduction of 1,500, the student claims 1,500. On the 1098-T Box 5 should show 1500 and box 1 should report 2,000.
If box 1 does not report what was paid, including the reduction, click the "what if this is not what I paid?" link under Box 1 on the 1098-T screen and enter the full amount.
