Sorry to hear about that and yeah, it sucks. It was probably a mistake to talk about interest rather than just getting the original amount back. I'd probably recommend talking to him about a payment plan on just getting the original amount repaid. At this point you're looking at either a slow repayment or nothing as J. Allen noted.
You may not have gotten anything down on paper initially, but you may be able to work out on paper a plan to repay, and in that way get some sort of paper trail about what is owed. Maybe 50 bucks a paycheck, which would be 100 a month. You're looking at four years, and you'll take a hit on interest you could've had, but at least it's better than nothing.
So you put on paper the amount loaned, the 1000 paid back, and the difference owed. Determine what's affordable, a workable time frame, some sort of ledger to keep track of payments made and get him to sign it. At this point you've got nothing to lose. Just stay calm, and let him know you're willing to work with him on repayment, but you've got to have repayment. Especially if they have jobs and are not struggling.