The student reports the income from the 1099-Q as well as the education expenses, but the student may not claim an education credit if he is a dependent. Only the parents can claim the credit.
The IRS is remarkably opaque regarding who reports the income from a QTP. While only the beneficiary can claim tax exemption for qualifying education expenses, the income from an excess distribution must be reported by the beneficiary to be taxed at the beneficiary's rate. Yet the parents claim the education credit.
If the 1099-Q distribution plus scholarships exceed the education expenses and therefore result in taxable income, the student should report the 1099-Q as well as the 1098-T, in order to demonstrate that the tax-exempt income was used for its designated purpose. In that circumstance, there will be no education credit for the parents to claim.
If the 1099-Q and scholarships do not exceed the cost of the education, then the parents should report both the 1099-Q and the 1098-T in order to claim the education credit.
More information about calculating the tax on nonqualified distributions can be found in Chapter 8 of Publication 970, Tax Benefits for Education.