"How can people be happy in heaven, knowing that their unsaved loved ones are suffering in hell?"

Those who ask such questions fall into the category of those who asked Jesus a similar question. The Pharisees said that a certain woman had seven consecutive husbands, so whose wife will she be in heaven (Mark 12:23)? Jesus answered by saying that they neither knew the Scriptures nor the power of God. The unregenerate mind has no concept of God’s mind or His infinite power. If God can speak the sun into existence; if He can see every thought of every human heart at the same time; if He can create the human eye with its 137,000,000 light-sensitive cells, then He can handle the minor details of our eternal salvation.

John writes that in heaven "we shall be like him; for we shall see him as he is" (1 John 3:2), so perhaps we will be fully satisfied that God is perfectly just and merciful, and that He gave every individual the opportunity to accept or reject Him. However He works it out, God promises that there will not be sorrow or crying in heaven. Our focus in heaven won’t be on our loss, but on our gain.