I wanted to take advantage of the time I have out of school and send a few query letters out. I was wondering though if this is a smart time to do it. I was thinking not. At this time of the year the agents are off themselves and will probably be getting a lot of letters when they come back and when they do and see all these query letters they might just send the automated responses to all of them, because they don't feel like dealing with all that right after a break.
You might be focusing on the wrong thing here. If you have the time and inclination to send queries, then send them! Any agents who send a form rejection because they're too lazy to process it aren't the agents you'd want anyway. But editors will likely come back to their desks in early January refreshed and ready for a new look at things -- and at the beginning of the month, they don't feel as pressured by end-of-month deadlines, so they can spend more time looking your work over before they have to make a decision. In any case, if you don't go fishing, you don't have a chance of catching anything. Send the queries; it can't hurt.
The best time to send query letters out is when your manuscript is highly polished and ready for agents. But really, it doesn't matter too much. Some agents have varying preferences and 'oh geez' times of year, but it's too varied to track really, and they're all still keeping their eye out for high-quality manuscripts they feel are marketable, no matter the time of year or size of the stack on their desk. All generally, of course, some agents do weird things, but as HeinleinFan points out, if an agent doesn't give your manuscript the time and respect it deserves, then you wouldn't want them anyways.
I agree. If you are at this stage then why not use your holiday time to write your letter - keep it on file and then post it in a couple of months time if you think things may have slowed down by then. But then again who knows when it is the best time?