Youth Hostel PTSM, is a large multi story hostel about two kilometers outside the center of Krakow. It may not be the best of your options in the area, although it is definitely the cheapest. The cheapest rooms of this place are about $8, but they are packed and have the look and smell of a place that never gets cleaned. The room is so packed that two sets of bunk beds are pushed side by side, which is great if you know the person next door, but not so awesome when they are a complete stranger. The ladders up to the top are bizarrely narrow, as if built for small children. Also, the bathrooms of this hostel were pretty scummy and the kitchen was poorly equipped and mysteriously on the fourth floor.
The other huge downside of this hostel is that there is a lockout in the middle of the day and then a curfew at midnight. And, on top of all these negative aspects, the staff are downright surly. They can't be troubled to give quality answers to questions such as the location of grocery stores or laundromats. I found the staff the luxury hotel across the street more willing to answer touristy questions even though it was obvious that the group of us weren't staying there.
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Don't do it. I've traveled extensively all over Europe and this is by far one of the worst hostels I've ever stayed in. Extremely loud school groups were staying there and they were up at all hours of the night as I remember. I was also placed in a room with about six other men, myself being the only female. The blankets were terrible and scratchy and overall it was just a really bad experience. 
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