Often hair falls out due to severe malnutrition, something with which all prisoners were very much afflicted.

There are a few reasons for this. One is, as stated,malnutrition and hard work. The goal of these camps was to work its inhabitants to death, or to near-death.

Most did have hair shaved off, either as a form of degradation (lots of Hasidic or Orthodox Jews have very large, bushy beards) or to stuff mattresses. While the mattress theory sounds a bit odd (coming from the descendant of camp survivors), I wouldn't doubt the Nazis doing that with the camp victims. Hair was also shaven off to prevent lice, which would kill off the residents before they could be worked to death.