How so?

If you replace the slightly loaded term 'bloat', you would get something fairly unobjectionable:

'Forgiving loans people take out for an activity, would lead to more of that activity.'

Or what do you mean?

I agree with your sentiment. I would fine tune the wording too:

'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).

What do you mean by 'appreciation'?

Price increases. Easy student loans remove a lot of pressure from qualified education providers for keeping their prices/expenses down.

Thanks. I wasn't quite sure whether increase in price was meant, or some kind of moral appreciation.

Appreciation means it would increase (i.e. appreciate). Price appreciation = it will cost more. Essentially saying if you give people a bunch of money for X, the going rate of X will increase as that's how supply and demand work.

Ok. I wasn't quite sure whether increase in price was meant, or some kind of moral appreciation.