There isn't a right thing to do because each situation is unique. The IRS has a great brochure that explains how scholarships and tax credits interact. Since scholarship income can end up creating income for the the Kiddie Tax that is another facet to consider along with which parents qualify for a credit. There are too many moving parts to say "this is the path".
Since we don't know your circumstances, your child's income, your qualifications, etc, we can only offer the basics.
The IRS also says a nontaxable transaction should not be entered. IRS Publication 970, Tax Benefits for Education states:
Page 45: Don't report tax-free distributions (including qualifying rollovers) on your tax return.
The education section of the return is quite complicated starting with something as simple as when to repot a form.
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