I just read this post so you may have already come and left New York- but I would try "Jazz on the Town East Village". I live here so I have never actually stayed in a hostel but I passed this one on my way home the other day. Like everything in NY you pay for your location- so the hostel may be mediocre but you will be in a good neighborhood. It would be where I'd stay on a budget.
FYI- there are 2 others- one in Midtown and one uptown...I dont rec those areas.
Good luck and have fun!
I stayed in the chelsea international two years ago and it was my first experience of a hostel. Looking back on it it is not the best best place to stay. The rooms remind me of a prison cell! Location isnt bad pretty central apart from the police station across the road! I had a police car outside of my room all the time i was there. Cannot get more secure than that.
I was there again in the summe and stayed in the Jazz on the Town hostel. Much much better, one of the best hostels ive stayed in and quality roof garden. Rooms are still a bit of a squeeze. Better location than chelsea. The hostel is based in the same building as a boutique hotel and has a very swanky reception. Highly recommended!!!!!