Why aren't I getting a tax break for child's college? I paid $25k on top of $40k in scholarships. It says scholarships exceed expenses.

If tuition paid by you and the scholarship together was 65K, enter that amount in box 1. If audited just provide proof of the tuition charged. 

Room and board are not qualified expenses for either the tuition credits or for scholarship  to be tax free.  For that reason, box 1 of the 1098-T  includes only tuition and fees. It does not include room and board or books and computers.

After entering the 1098-T, you will be asked if you have any book expenses,  That will give you a screen to enter  book and computer costs (which are qualified expenses). A few screens later, you will be asked if any of the scholarship was used for room and board. Answer yes.  To give you an example, lets assume books and computer were $1000. You have $26,000 of qualified expenses (25, 000 + 1000). You need $4000 to claim the American Opportunity Credit, leaving $22,000 of the expenses to apply to the scholarship,  Enter $18,000 (40,000 - 22,000) as the amount of the scholarship used for Room & board.  Y0ur student will have to report $18,000 of scholarship income on his separate tax return.