Gossip is hurtful because it hijacks a child's very identity, replacing actual fact with the bully's fiction. A child no longer controls his or her social reality. A teen that holds honesty in high regard can suddenly find themselves living with an identity as a dishonest backstabber, all through no action or fault of their own. A heterosexual child who has others spread rumors that he is gay can find himself struggling to overcome a label that alters his core identity as a person, and there is often nothing that can be done about it.
Though we like to pretend that in America we are fair and forgiving and non-judgmental, this is a happy little delusion we tell ourselves to feel good. In reality, we are a people that eat up more tabloid gossip while judging others more quickly and harshly than any other nation on earth. There are numerous examples of people who have been cleared of crimes with irrefutable proof of their innocence, who nonetheless have to deal with large swaths of the population who refuse to give up their original judgment of guilt. A bullied child who is bullied through rumors and gossip often finds themselves facing similar challenges. Their bully is writing the narrative of their life, and no matter what they do, a large percentage of their peers - perhaps even a strong majority - will uncritically adopt these negative judgments as fact, which in turn alters the way they perceive and interact with that person, which impacts the victim's social identity, which in turn influences their very identity as a person, since a large part of our identity comes through how the world is reflected back to us. Hopefully, this helps you appreciate just how harmful bullying through gossip and rumors can be.