How do I make my 1098-T tax free, when it was used only for tuition?

The scholarship amount is greater than the tuition amount then the difference is taxable income.

If it (the scholarship) was  only used for tuition, and your and your parents ate not claiming a tuition credit, then just don't enter the 1098-T in TurboTax (TT).

If it was  only used for tuition, why does the school show more in box 5 than in box 1? 

One possibility is that TT has assumed that your parents are claiming the tuition credit on their return. 

 You will eventually reach a screen "amount used to claim the education credit". TT usually prepopulates that with $4000. You should  change it to $0, if your parents are not claiming the credit.