Hello sabalagirl.
I don't know about hostels in San Sebastián.
I just want to say you two things. The first one that you must know is that in the Basque Country "San Sebastián" is called "Donostia". So, if you see any market or something as "Donostia" it's the same as "San Sebastián".
The second thing is a little old bar. It's name is "Juantxo" and it's in the inner city (parte vieja). There you'll find the best "bocadillos de tortilla de patatas" of the world (almost in my opinion). If one day you just want to dinner a bocadillo and a beer you should drop by this bar. The squiz bocadillos are also very good.
This bar is located between Embeltra an Esterlines streets. It has an entry in each street. Those streets are parallel to the Boulevard. If you are in the boulevard near the city hall and come into the parte vieja, the first street on your right is Embeltra street.
Good luck!