Really sorry to hear all that- but... that's the way the cookie crumbles. As the old saying goes: "Make sure your ducks are all in a row".
Before wanting to retrieve back-rent (which I whole-heartedly agree with your family seeking), and damages to the property (which, I'm surprised you won even though I agree with-as most 'bare minimum maintenance' is supposed to be seen to by the landlord/lessor for the most part) there should have been a thorough examination of ALL the affairs regarding said issue before action was taken. In tactical terms, you launched an offensive but left your flanks unguarded.
In the end, it boils down to: THEY mishandled YOUR property, and YOU(R) family mishandled THEIR security deposit. And, let's be honest... most people (not saying you/your folks would, but the fact that it is not unreasonable to assume) would cut corners on repairing the property in terms of looking for the 'cheapest' alternatives and pocketing the left-over cash for personal use, maybe some new clothes, or to catch up on some bills, or.... whatever, really.
Its no different than them wanting their security deposit *back* (+ damages?) to use for their personal use. Had everything been handled appropriately, the security deposit would have been returned to them (or applied to the repairing the damaged property, possibly) for THEIR personal use. Saaaaame cookie jar.
Also, on the note of sending their kids to college/scholarships/etc... I grew up B-R-O-K-E, and busted my arse to get into a very well-respected business school, with *some* scholarships... to the tune of a few thousand. Scholarships are not easy to come by, and MANY, MANY deserving individuals are denied, and a vast majority of the scholarships out there are "nickle and dime" in terms of they pay maybe... 400$ a semester or a year, or whatever, barely a drop in the bucket.
Moral of that^ lil' rant... if they use the $ legitimately to send their kids to college when otherwise they wouldn't have been able to afford it... well, its a far cry better than using it to... say, travel Europe or something.
Tl;DR... I agree that the situation sucks, make no mistake about it and I hope things turn out for the best. But, anytime someone pursues legal action against someone else... they need to make DARN sure that everything on their end is sewn up tighter than a nun's snatch to avoid repercussions. If they don't... then, eh... the argument loses a ton of the "umpf" behind it.