The Bombers were ejected from the finals on Tuesday night after two days of negotiating with the AFL over the 2011-12 supplement program.
They were also fined $2million and have lost their first and second round draft picks both this and next year.
Hird was slapped with a 12-month suspension, back-dated to August 25, 2013.
Lloyd, along with other past players, held a morale-boosting function for the current list two weeks ago and said they had still planned on playing in September then.
Click here for full coverage of the Essendon supplements scandal
While no player said they wanted to leave the club, he worried the news that their season would end on Saturday night against Richmond would leave a lasting dent in their psyche.
"You wonder if an off-season is enough to rebuild the spirit?" Lloyd told 3AW on Tuesday night.
"The mental scarring and the fall out from this … does it carry on into next year?
"As little as 14 days ago, they were all about that they couldn't wait for the finals.
"They were all about getting themselves right, getting their form right, about playing a finals game in two weeks time.
"Just what this does to them, I don't think we'll know the spirit that it breaks and all this damage that it's going to do over the coming months and years."
The Bombers will finish ninth this season as a result of their sanctions.
Assistant coach Simon Goodwin will coach the Bombers on Saturday night.
Essendon chairman Paul Little said there were already three shortlisted candidates prepared to accept Hird's role for 12 months and that Hird would be offered a contract extension.
He said Hird would take over in time for the 2014 finals, if the Bombers made it, and the club was negotiating a contract extension with the belief the club great would want to go on beyond his sanction.
However, Lloyd – a premiership teammate of Hird's – said the best candidate would be Mark Thompson if the Bombers wanted Hird to resume.
"If Paul Little wants James Hird to coach that football club again, I think he needs Mark Thompson to be the [interim] coach," he said.
"I don't see any other alternative in regards to coaching to the James Hird style and not messing up with the players' minds in that, we've got an interim coach for 12 months who's teaching us something completely different.
"Mark Thompson will go along the James Hird line but if it's not him, I just think that you're pretty much stalling the club for 12 months because you're getting someone in to go away from everything they've built over the last three years under Hird."
Lloyd said there was "not one word of discontent" among the players when he met with them two weeks ago.
However, he raised concern over the long-term effects of the sanctions by comparing the situation to Adelaide's recent brush with AFL legislation.
The Crows were hit with penalties last year for their dealings with former player Kurt Tippett's contract, with CEO Steven Trigg stood down for six months and slapped with a $50,000 fine.
Lloyd said he often wondered what people at the Crows thought of Trigg, who was not only punished himself but oversaw an incident that cost the club picks in the first two rounds of this year's draft unless obtained by trade.
"The animosity … I sometimes think to myself, what do people think of Trigg?" Lloyd said.
"They've had a tough year; do they often look at Trigg and think you were a big part of this problem that we're now having as a football club?
"We were on the cusp of winning a premiership and now with the selections we're losing, we're going backwards and other teams are going past us.
"That's something that I often think about when people accept and welcome people back with open arms.
"The scarring is not just for the next 12 months but it could be for five to 10 years.
"The draft picks, the first two rounds … I think it will really hit them in three or four years time where you look back and those four picks we've missed out on, what a hole we've now got in our playing list.
"That will also haunt the Bombers for a long period of time."
Twitter: @AFL_JenPhelan
