If you feel your Strings can occupy lots of memory then dont make them static or declare them using String literal. As both of these will get stored in permgen space and will almost mever be garbage collected [there is chance but slim, statics may never be garbage collected is you have not created your own classloader].
So create String using new operator so that will be created in heap and can be easily garbage collected i.e.
String str = new String("long string");
EDIT:
How strings are stored: http://www.ntu.edu.sg/home/ehchua/programming/java/J3d_String.html
EDIT:
There has been a long discussion below regarding how new String works. Argument presented is that new String will create 2 objects one in heap and one in pool. THIS IS WRONG, it is not true by default and you can force java to do it by calling intern method. In order to back my argument following is the javadoc from Strin class for intern method:
intern
public String intern() Returns a canonical representation for the
string object. A pool of strings, initially empty, is maintained
privately by the class String.
When the intern method is invoked, if the pool already contains a
string equal to this String object as determined by the equals(Object)
method, then the string from the pool is returned. Otherwise, this
String object is added to the pool and a reference to this String
object is returned.
It follows that for any two strings s and t, s.intern() == t.intern()
is true if and only if s.equals(t) is true.
All literal strings and string-valued constant expressions are
interned. String literals are defined in §3.10.5 of the Java Language
Specification
As can be seen by above doc that if new String always created an object in pool then intern method will be completely useless!! Also logically it doesn't makes any sense.
EDIT:
Also read the answer for this post : String pool creating two string objects for same String in Java