Croatia just canceled the debts of its poorest citizens

A similar method of helping the impoverished, one which has strong support among at least some economists (and maybe more widely), is cash transfers directly to the people who need it. That is, don't fund a service for those in need, fund the people directly and they can buy what they need. GiveDirectly is a leading implementation of this idea:

https://www.givedirectly.org/

It was founded by economists, and their blog has a lot of interesting discussion and analysis of the idea: http://blog.givewell.org/category/givedirectly/

One way to approach this idea: Why not do it this way?

There's a fantastic scene in the Count of Monte Christo where the Count and his guests witness a double-execution. In fact, thanks to the wonders of the Internet, here it is, from http://www.cleavebooks.co.uk/grol/dumas/count035.htm . Franz, Albert an the Count are witnessing the execution:

Behind the executioner came, in the order in which they were to die, first Peppino and then Andrea. Each was accompanied by two priests. Neither had his eyes bandaged. Peppino walked with a firm step, doubtless aware of what awaited him. Andrea was supported by two priests. Each of them, from time to time, kissed the crucifix a confessor held out to them. At this sight alone Franz felt his legs tremble under him. He looked at Albert — he was as white as his shirt, and mechanically cast away his cigar, although he had not half smoked it.

[...]

"I thought," said Franz to the count, "that you told me there would be but one execution."

"I told you true," replied he coldly.

"And yet here are two culprits."

"Yes; but only one of these two is about to die; the other has many years to live."

"If the pardon is to come, there is no time to lose."

"And see, here it is," said the count. At the moment when Peppino reached the foot of the mandaïa, a priest arrived in some haste, forced his way through the soldiers, and, advancing to the chief of the brotherhood, gave him a folded paper. The piercing eye of Peppino had noticed all. The chief took the paper, unfolded it, and, raising his hand, "Heaven be praised, and his holiness also," said he in a loud voice; "here is a pardon for one of the prisoners!"

"A pardon!" cried the people with one voice — "a pardon!" At this cry Andrea raised his head. "Pardon for whom?" cried he.

Peppino remained breathless. "A pardon for Peppino, called Rocca Priori," said the principal friar. And he passed the paper to the officer commanding the carbineers, who read and returned it to him.

"For Peppino!" cried Andrea, who seemed roused from the torpor in which he had been plunged. "Why for him and not for me? We ought to die together. I was promised he should die with me. You have no right to put me to death alone. I will not die alone — I will not!" And he broke from the priests struggling and raving like a wild beast, and striving desperately to break the cords that bound his hands. The executioner made a sign, and his two assistants leaped from the scaffold and seized him.

"What is going on?" asked Franz of the count; for, as all the talk was in the Roman dialect, he had not perfectly understood it. "Do you not see?" returned the count, "that this human creature who is about to die is furious that his fellow-sufferer does not perish with him? and, were he able, he would rather tear him to pieces with his teeth and nails than let him enjoy the life he himself is about to be deprived of. Oh, man, man — race of crocodiles," cried the count, extending his clinched hands towards the crowd, "how well do I recognize you there, and that at all times you are worthy of yourselves!" Meanwhile Andrea and the two executioners were struggling on the ground, and he kept exclaiming, "He ought to die! — he shall die! — I will not die alone!"

"Look, look," cried the count, seizing the young men's hands — "look, for on my soul it is curious. Here is a man who had resigned himself to his fate, who was going to the scaffold to die — like a coward, it is true, but he was about to die without resistance. Do you know what gave him strength? — do you know what consoled him? It was, that another partook of his punishment — that another partook of his anguish — that another was to die before him. Lead two sheep to the butcher's, two oxen to the slaughterhouse, and make one of them understand that his companion will not die; the sheep will bleat for pleasure, the ox will bellow with joy. But man — man, whom God created in his own image — man, upon whom God has laid his first, his sole commandment, to love his neighbor — man, to whom God has given a voice to express his thoughts — what is his first cry when he hears his fellow-man is saved? A blasphemy. Honor to man, this masterpiece of nature, this king of the creation!" And the count burst into a laugh; a terrible laugh, that showed he must have suffered horribly to be able thus to laugh.

However, the struggle still continued, and it was dreadful to witness. The people all took part against Andrea, and twenty thousand voices cried, "Put him to death! put him to death!" Franz sprang back, but the count seized his arm, and held him before the window. "What are you doing?" said he. "Do you pity him? If you heard the cry of 'Mad dog!' you would take your gun — you would unhesitatingly shoot the poor beast, who, after all, was only guilty of having been bitten by another dog. And yet you pity a man who, without being bitten by one of his race, has yet murdered his benefactor; and who, now unable to kill any one, because his hands are bound, wishes to see his companion in captivity perish. No, no — look, look!"

I think the scene speaks for itself and reuires no further comment.

You know there's at least one poor Croatian that paid off his debts and feels like a real sucker now. Kind of like how the last Americans to pay for their own community college tuition will feel.

It was probably a mistake in judgment to give yourself health problems for anything money-related.

This is a very interesting comment and I used to think similarly, but Matt Levine over at Bloomberg convinced me over several articles (couldn't find exactly which ones on a casual searching) that it's a little more subtle than that. In contracts between big companies, this is absolutely true. Financial institutions expect that companies will act as rational economic actors and discharge their debt when it's beneficial for them to do so. But in contracts with very small business or with individuals (say mortgages), people act economically irrationally, constrained by social norms, and not dumping their debts as quickly as the laws allow. This results in lower delinquency rates than would otherwise be the case, so the actuarial models allow for the pricing of lower interest rates, more lenient credit policies, etc. If individual people starting acting like big corporations, then default rates would go up and correspondingly interest rates on things like mortgages would go up to.

This isn't to say that that state of the world is worse. It might be better! Certainly we shouldn't discount the burden it places on people to feel guilty over their debts. That's real cost to them and to society generally. But if the social norms around debt changed, they wouldn't change in a vacuum. Probably rates would go up and that's a real cost as well.