1098-T Question: Why Is Box 1 ($6,725) Higher Than Box 5 ($3,748) When I Didn't Pay Out Of Pocket For Tuition?

I received financial aid for school and didn't pay anything out of pocket. Got my 1098-T form and entered the info but im confused if I actually need to claim this since I never paid anything myself. The school gave me the form but everything was covered by grants and aid. Anyone know what to do with this? When I was filling out my taxes, I entered my 1098-T information and I'm seeing that Box 1 shows "Payments received for tuition and related expenses" of $6,725. But Box 5 shows "Scholarships/grants" of $3,748. The thing is, I didn't actually pay the $6,725 myself - it was all covered by financial aid, grants and scholarships. I'm confused why Box 1 and Box 5 don't match up though. There's a difference of $2,977 between what the school says was paid for tuition ($6,725) and what they're reporting as scholarships/grants ($3,748). Box 4 for "Adjustments made for a prior year" and Box 6 for "Adjustments to scholarships/grants" are both empty on my form. I'm about 1 hour and 55 minutes into filling out my taxes and I'm stuck on this part. Do I need to report this as income? Do I owe taxes on the difference between Box 1 and Box 5? I thought everything was covered and I wouldn't need to worry about this. I'm really confused about how to handle this on my tax return since I didn't personally pay anything out of pocket for my education.