Your real final exam: How to pay student loans

Dear Debt Adviser, I am a recent college graduate and finally employed! It's not my dream job, but in this brutal economy, I cannot complain. I'm saddled now with $110,000 in student loans, thanks to more than four years at a private university. My monthly payments are about $1,200, which will be tough to pay, given that my monthly salary is only $2,600 after taxes. It saddens me to think that I'll spend the next 12 years paying for my education. How can I save for retirement while paying these loans? -- Justin

Dear Justin, If I ever get the kinks worked out on my time machine, I'd help you go back and spend less money in college. Until then, you must make the best of your situation. You need to find a way to live with that pricey private-school education.

First, look for ways to save money. Find a roommate, and live within your means. Find a place that's safe and clean, but avoid high-end rentals with granite countertops and stainless-steel appliances. Drive a used, reliable car instead of a new SUV. You get the idea.

I want you to put together a spending plan that allows you to save money, pay down your student loans and meet your essential living expenses. I also recommend that you begin saving for emergencies. A savings cushion of six to 12 months' of basic living expenses is essential in case you get laid off or fired.

Next, spend wisely as you receive raises, promotions, overtime, bonuses or other increases in your income. I want you to put at least half of that increased pay into savings. Your current spending plan doesn't include this income, so it will be painless. You can use the rest to pay for other things such as a vacation, a new car or a gym membership.

Trust me: The next 12 years will fly by, and you will look back on them as your best ever. As long as you have spending and savings plans and stick to them, the rest will take care of itself.

Good luck!

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