No, it is not the only way.
Usually it is best as the tax on the distribution for the student is usually less than the credit for the Taxpayer claiming the student.
The income on a 1099-Q, if taxable, needs to be claimed by the person that was issued the 1099-Q, either owner or beneficiary. Form 1099-Q should have been issued to the person that made the distribution.
Room and Board expense can offset a distribution, but cannot be used for a credit.
In order for the student to not be a dependent, that student needs to have supplied more than half their own support and scholarships do not count as the student suppling support.
Type letme into the search and the program will show you a screen for the credit it is suggesting. You can change the allocation of expenses to the credit via this screen.
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