Good morning bermeister:
Regarding room & board specifically, the IRS requires the student students be enrolled at least half-time when the expenses are incurred to qualify. IRS Publication 970 (Section 8 is QTPs, which includes 529s) states this specifically on page 59. So the question for your institution is whether the student is considered enrolled during the Co-Op or not.
VP, Research & Development
This information does not constitute tax advice and is provided for informational purposes only. Please consult your tax advisor, financial advisor, local taxing authority, and/or plan provider or sponsor for more information.