'Forgiving loans people take out for an activity, would lead to more demand and greater price appreciation of that activity.'

I think the great harm was disconnecting students from the immediate consequences of their educational spending with easy to get loans.

That economic disconnect has made it ever easier for schools to charge more for less actual value. Whether in poorly directed education (exceptional education in areas with poor career potential), or simply over priced (top heavy admins, and other overhead or expenses beyond providing actual education).