Education

It sounds like you are trying to use all tuition expense (2,500) for an education credit.  In that case you would need to claim all the 12,000 scholarship, not just 9,5000 and you do not enter that as "other income" in the Income section in TurboTax, it is all done in the Education Section. 

To enter in TurboTax, first enter your income statements, such as your W-2 in the income section.

Switch to 

• Deductions & Credits 
• Education
• Expenses and Scholarships (Form 1098-T)

(you may need to select EDIT if you previously enter the 1098-T)

Go through the interview, in your case entering 2,500 in Box 1 and 12,000 in Box 5. 

On the "Did You have any of these situations for the scholarship or grant?" screen select "You used it to pay room and board" and the amount. Since you want to use all the 2,500 in Box 1 for the credit, you would enter the full amount of the scholarship, in your case 12,000 here. In other words, you are claiming ALL the scholarship as income so that the full amount of tuition goes towards a credit. 

The program will move the 12,000 scholarship to Schedule 1 line 8r and that will flow to your 1040 line 8 as income. 

Now the remaining expenses, in your case the full 2,500 tuition, will be listed on Form 8863 and an education credit (if any) will be calculated. 

On your unrelated note, if you had scholarship income in the past and that scholarship was taxable income because it was not used to pay education expenses such as tuition, fees, books and supplies, you would need to amend your prior returns depending on the amount

The tax would be a liability to the student, not the parent. 

The scholarship amount would need to result in the student having an income high enough that the student would need to file.