I don't totally understand--did he already have a loan, or did they stop his benefits and tell him to go get a loan? That makes all the difference--I don't know if I am misunderstanding your post.

I tried to find a better, verified source.. but this is all I could find that states that loans do not affect SSI:
http://www.ehow.com/way_5498968_loan...-benefits.html

EHow is not really a credible source, and is not the final word--the SSA would obviously be the final word.

It does say this though:

"However, it is important to make sure that any funds you borrow are spent in the same month that you enter the loan agreement. If the funds are not spent, they will count toward the SSI resource limit of $2,000 (or $3,000 if you are a married couple), and that difference will be deducted from the following month's benefit payment."

So, if he already had a loan and it was more than $2000, they rightfully took away his benefits because even though a loan is "borrowed money", it is still money. They apparently do the same thing if you loan a friend or family member money, though I was never asked about that when I applied and was accepted for SSI.

If I am reading your post incorrectly, and they stopped them for no reason and told him to take out a loan, that doesn't seem right.. or legal.