In reviewing the thread, I just noticed that you earlier said the scholarships are "designated for tuition and fees".
That sounds like a restricted scholarship. If so, you can not allocate the $3100 of tuition and fees to the AOTC. Tuition must be allocated to the scholarship. Therefore there are no expenses available for you to claim the AOTC. The $1800 you paid, out of pocket, did not go to qualified expenses and so can not be used to claim the AOTC. Another way to say it: all the qualified expenses were allocated to the scholarship, so there is none left to allocate to the AOTC.
The student's taxable scholarship is $5303 - 3100 = $2203.
You should verify with the school what the $7110 in box 1, of the 1098-T, actually covers.
