I think you can do anything you want to get it to show $5000.  Both of the options that you mentioned seems to work. 

I also think that no matter what you do, the taxpayer will get an IRS notice.  So you may want to prepare a response to that now, and tell the taxpayer to send that in (along with the note from the 1098-T) to the IRS.  And tell the taxpayer it is likely the IRS will lose that, and that they will need to mail it in again.  😂

As a side note, the IRS has said that colleges do not need to enter that non-taxable amount in Box 5, so that college is making it more difficult by reporting it that way.