At my last shop, I set up an internship program and worked with people at local universities/colleges. Most of the interns came from the j-school at the main university in our area, but I kept in touch with the people at the other schools as well. As much as I would have loved to pay interns, my boss was (still is, even worse now) a cheapskate and thus it was an unpaid program.
Each quarter I would send an ad to the different schools to recruit interns. If a student expressed interest, I would meet with him or her and explain our program. If the student was still interested, I would get a copy of his/her schedule and then figure out a time to meet on a regular basis. We would meet on a weekly basis (at least) to go over story(s) ideas for the week ahead. For example, if the intern was covering a meeting, I would go over the agenda and the meeting packet. If there was a particular issue of interest, I would share stories I had done on that topic in the past. If there were particular people worth interviewing, I would pass along the necessary contact information.
The main thing was giving the interns enough information to do the job, then go over the writing to see what worked, what didn't. After the intern wrote a story, I would make corrections and we'd go over both versions of the story, with me explaining each change.
For me, the best part was the moment the interns "got it." Once an intern covered a council meeting. When we met, I showed her the story she wrote. "You buried the lead," I told her. She was confused. I showed her the edited story. This lady was being honored for her years at the police department. When her son was 2, he was scared of McGruff the Crime Dog. Now as an adult, the son WAS McGruff and greeted children alongside his mom. I made that the lead. The intern's face lit up when she saw the edited story.
I ended up having some great interns, plus some that were not too good. The ones that were great I would have LOVED to hire, but again my boss was too cheap to do that (there was money to hire, but he chose to waste it on useless crap). One intern we did take on part-time at minimum wage, but it's hard to live on $170 a week. Fortunately he's full-time elsewhere now.
I know at least three of my interns have since gotten full-time jobs at other papers. I was honored to be a reference for them and gave them glowing recommendations, not just because they were good but because they put the effort in. The interns that were lazy? No way in heck would I give them a glowing recommendation.
It was a lot of work to set up the program and quite a bit of work whenever I got a new intern, but it had to be done. Part of that was because I couldn't cover everything in a town of 60K by myself, but also because I wanted the interns to get a good education and some solid clips. I did an unpaid internship myself in college; my boss ended up hiring me full-time once I graduated from college. In that sense, it's paying it forward. I learned so much more in my internship than I had in the classroom; I wanted my interns to be well versed in as many aspects of journalism as possible (different types of stories, photography, etc.) to make them well rounded.