I agree with you for not reporting him as a full time student. When it comes to the IRS most people are not aggressive enough. Obviously don’t lie about anything but they’re pretty forgivable. The worse case is that you get audited but even then it’s just a discussion between you and the IRS. 7 hours a week is not full time for anything in my opinion so you should be fine. His AGI is low so it is unlikely there will be any serious red flags that pop up if you choose to do this.
By the way, why are you filing your nephew’s tax return if I may ask?