Why doesn't the college issue a 1099 for taxable scholarship income?

1099s and 1098s have different purposes. 1099s also report to the IRS that certain payments were made to the SSN. 1098s are just information, that the school billed a certain amount and credited a certain amount, but not that any of that was income, taxable, perhaps a credit is available. Just information. Many many people get 1098s and it is of no tax consequence either way, nothing is taxable and nothing indicates a credit. Mortgage interest, refunds, etc are reported on 1098s because there is no deduction for the business issuing the 1098. Information only.

If a 1099 is issued, the IRS is looking for it to show up on a return somewhere. The business is taking a deduction, and the IRS wants to see someone paying a tax on it.