[CoryG89]

As some others have said, it all depends on how the debt is forgiven. If the government uses tax payer money to repay the loans, then you are correct. If the government makes universities and/or loan providers eat the cost in cases where it can be shown that they should have known the debt would not be able to be repaid, then the loan providers will not have an incentive to give out as many loans as possible to people who will be unable to repay them.

The party in the best position to know who will and won't be able to repay a particular loan is the lender, who has all the historical data and statistics about previous loans.