How to Get Out of Debt

The author of Generation Debt on paying off loans and living within your means.

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In Generation Debt, Carmen Wong Ulrich explains how college graduates laden with debt can take back control over their finances. While she advocates budgeting and cutting back on unnecessary purchases, she also acknowledges the need for some indulgences. And she makes the case that despite the hefty debt loads carried by young adults, financial success is possible with a bit of extra work. U.S. News spoke with Ulrich about how to get there. Excerpts:

Who is "Generation Debt"?

I wrote the book with a certain group in mind—younger Americans from ages 18 to 35—but it embraces anybody in a substantial amount of debt and looking to do things like buy their first home.... This generation has certain financial concerns that are very different from previous generations'. Starting entry-level incomes haven't really budged since the 1970s, but in the 1970s, Pell grants paid for over 80 percent of college tuition, so you could graduate without huge debt levels. Now, the norm is graduating with five figures of debt, and a college education is more important than ever. You're starting up behind, so you have to be really careful in the beginning to set certain routines and mind-sets. As you say, debt is almost unmanageable for many graduates. Is there really a way to get control of it?

Absolutely. The biggest way to get control is to have the attitude to get control of it. That is the biggest hump that most people in debt have to get over. It's a real combination of attitude and behavior. It's getting a better picture of what you want. When you have barely any income, the mind-set has to first be to take control. You have to make the decision to do it, and you have to have a reason why. Not just, "I want to get out of debt," but is it causing a lot of anguish? Is it because you want to own your own home? Having these concrete goals in mind helps you follow up with the actions you need. It's like a switch in your brain. Once you flip the switch, you are much more likely to succeed. It's kind of like stopping smoking. Something just needs to click in your head that says, "This is detrimental to me."

As a young college graduate with a lot of debt, do you basically have to resign yourself to living a spartan lifestyle?

Spartan in the sense that you won't have as much as the buddy whose parents could give him a free ride but not spartan in the sense that you just completed one of the best investments in your adult life. If you think in the next couple years, "I can't have that, I can't go there, but in a couple years, I'm going to be out of debt and I will have a home and have a car and won't be in debt," then maybe it's spartan now, but you are maximizing the investment you just made, and you're doing it all for a reason. And there are ways you can still have some luxuries. What are some of those ways?

The best thing is, once you really know how much money you have coming in and how much you owe and how much it costs to have the things you want, then it really helps you get an idea. Do I need to get a second job? Find a higher-paying job? It gives you a realistic picture of what you can afford to do. You do need little luxuries, and you can fit them in no matter how small [your income] is, but you can't have them all the time. So it's OK to have some indulgences.

Absolutely. It's the whole dieting thing. If you go from five cookies after dinner to having one cookie, you'll probably stick to the diet a little longer. If you're going to have no luxuries, you'll feel like crap. Then you'll do stupid things like use your credit card because it all builds up inside you. You've got to let yourself have those little things, especially when you're living a spartan life. Boomers sometimes say, "Stop buying bottled water, stop buying lattes," and I'm like, you can't realistically ask this generation to do that. It's part of being a social human being in your 20s and 30s.

What are your indulgences?

Music on iTunes. I take cabs once in a while. That, to me, is an indulgence. I'm always cognizant of how often I do it. And pedicures. If I can fit that in, I'm thrilled.