Yes the program is correct.  You are much better off claiming the earnings as income and taking the education credit than the other way around.  You can only use the net tuition/books amount once but it does not matter which one you choose.  Make sure the line on the student info sheet that says amount used for credit only reads $4,000 so the remainder of the tuition can help offset the 1099-Q's.  Sometimes Proseries fills this line in automatically wrong.