I think he's having trouble because he wants to get it all at once but tell him, he needs to take time and withdraw it slow and little by little with small amounts that won't remove him from that aid program.
The problem here is that he needs to justify where he got such amounts, small or significant, since it will come through an exchanger account. The bank or the gov can ask at any time anything related to it.
If he uses a KYC exchange, even for small amounts, could authorities link his wallet to him?
Could banks or tax offices freeze his account or ask for explanations if more money starts showing up?
Would this be counted as "assets" and disqualify him from his student support?
Yes to all of them.
Or… is there a better/cleaner way to go about this?
He’s not looking to avoid taxes, but just wants to stay under the radar and avoid issues with banks or government benefits.
Actually, yes, there is. Since he won a mid-five figure amount and he doesn't have a problem paying taxes etc, why not repay his loan and do whatever he wants with the rest? I'm guessing that his loan is far lower than the amount that he won.