Anyone interesting in creating things out of styrofoam should have a hot knife. A hot knife allows you to cut styrofoam with nonjagged edges, unlike the result you'd get with a typical serrated knife. Not only will you get smooth edges, but you'll be able to create the most precise cuts. They work exceptionally well for making clean curved cuts, which can be nearly impossible with any other type of knife. Hot knives are readily available at most craft stores, but you can save money by making your own.
Place the soldering iron tip on a hard, flat surface. The surface may become slightly damaged from the heat, so use an old piece of wood or some other surface that isn't important.
Hit one side of the soldering iron tip with the hammer gently. Do this several times and avoid using too much force. Continue hitting it lightly until the one side is flattened out.
Flip the soldering iron tip over and flatten that side out with the hammer. Use the same process of light hammering. When finished, the soldering iron tip will be flat and slightly longer than it was to start.
Attach the soldering iron tip to the soldering iron. This process is slightly different for all soldering irons, so read the instruction manual.
Turn on the soldering iron. The tip heats up and will allow you to cut through styrofoam. This knife works the same way that a hot knife would when purchased from the store. Both use a heated electric current on the blade---or tip in this case---making it easier to cut through many materials.
Cutting styrofoam with a hot knife releases harmful fumes. Always wear a face mask and cut the styrofoam in a well ventilated area.