system
Given the following post, respond as if you're commenting on Reddit:
human
Would debt forgiveness for things like student debt and medical bills have negative effects on the economy?

I’m only asking because I saw a video on it, I liked it but I wasn’t sure how actually feasible debt forgiveness would be, or rather if there would be repercussions for immediate forgiveness given the structure of debt in America. Like, would creditors not having debt to sell around have any affects on the economy in the immediate? How about generally speaking long term? Has there been studies conducted on this? I haven’t been sure where to look so I just wanted to come here and ask.
gpt
Most lenders are companies and not governments, largely banks. This means forcing them to forgive debts is equivalent to confiscating their money and giving it to the people who owe the banks. Once you do that, banks either (1) pack up and leave, or (2) bake the probability that you will screw them into future interest rates. This effectively means that by cancelling debts for one generation of students, you doom all future students to have no access to debt - which basically means to access to higher education.

There are ways around it, for example the government might be the one issuing the loans; or more convolutedly, the government pays the loans to the banks on behalf of the borrowers. This isn't great either, because you're effectively transferring money from taxpayers to students/sick people (and banks get to pocket a bit too). But not to all students/sick people, just the ones with poor financial management (we call this moral hazard). Ironically, the ones with good financial management would have realised they can't afford student debt in the first place and not have taken any. In that case, the superior policy would be to just provide free or heavily subsidised education/healthcare, which avoids this entire tangle.