even if they were never repaid.

This is more of a strategy to get the cash out of the person's hands and into more of a trustee type situation so that if there is an emergency the parents can give back some of the cash for needed expenses, as determined by the parents, or, preferably, keep the cash as payment against the "car loan."

Does anyone have experience with how the foodstamp office operates?

They can always stash the cash for 6 months and then give it to the parents every 6 months when they visit, but IMO a monthly check sent in the mail would be more helpful.