Every July 1, the interest rates on federal student loans are adjusted. This past July 1 was no exception, and now the new interest rates are exceptionally low. The rates on Stafford loans have been reduced to 3.42% for borrowers making payments, and 2.82% for borrowers still in school and whose loans aren't subsidized (i.e., the government isn't paying the accumulating interest while the borrower is still a student).

The rates on PLUS (Parent Loans for Undergraduate Students) loans have also been reduced, to 4.22%. However, the Perkins loans (for lower-income students) remains fixed -- as it always has been -- at 5%, which was an excellent rate just a few years ago but now seems like outright usury.

With such low interest rates -- plus the fact that interest on student debt is tax-deductible for many taxpayers -- it might seem that these loans are free money. But don't fall for it. Taking on thousands of dollars of debt can be overwhelming for a 22-year-old beginning her career, regardless of the interest rate. Could you imagine starting out in today's job market with almost $20,000 in debt (the size of the average student loan)? And remember that the rates are adjusted each year. Rates probably won't stay this low forever.

While borrowing money to get a degree is generally smart, students shouldn't take on more debt than is absolutely, positively necessary. That might mean choosing a less-expensive school or finding other sources of funds.

Those who already have federal student loans might consider consolidating them to lower the interest rate, lock in the lower rate, reduce monthly payment amount, and extend the payment period.

However, consolidation isn't for everyone -- especially if you've consolidated in the past, since you can do it only once. Since many lenders knock a percentage point or two for loans that have been paid on time for three to four years, borrowers nearing that landmark may want to hold off on consolidating. And if your crystal ball says interest rates will be even lower next year, then wait until next July 1.

For more information, visit the Education Department's consolidation site or SallieMae. To learn more about finding funds for higher education, visit our College Savings Center or check out our latest book, The Motley Fool's Guide to Paying for School: How to Cover Education Costs From K to Ph.D.