It's definitely a tough line to walk. I was lucky in that it was a blessing in disguise, and this summer was probably the best one of my life. Your intern won't remember how much they were paid (though non-alcoholic beer money is nice), but they will remember the kinds of things they picked up along the way.

It sounds like you did right by your intern, despite the difficulty of trying to train college kids who have probably never had to make a living as a coder.

Also, a story to tell goes a long way.