The flight instructor reported that the student pilot made a normal takeoff from a turf runway. While the student pilot was flying the departure leg, the flight instructor initiated a simulated engine failure. During the student pilot's approach, the flight instructor noticed the airspeed deteriorate. The flight instructor stated that when he attempted to assume control of the airplane, the student pilot did not release the controls. A sink rate developed and the airplane struck a power line prior to the runway. During ground impact, both wings and fuselage were substantially damaged. The student pilot did not recall the accident sequence of events due to his injuries.