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An ex once stayed at the Caledonian Backpackers on Queensferry St (right at the end of Princes St). She said it was fine, and she's a fussy American type. But this was nearly 10 years ago so no guarantees.
how's your ar*e?
to get any sleep in a hostel in Edinburgh at the end of the Fringe/start of students turning up. How cheaply are you prepared to get hammered? Is it less money than the difference between hotel and hostel?
I'd also consider bus/taxi fair out of the city centre to a cheaper hotel if the centre is pricing you out.
Only other suggestion I have is somewhere like the Ailsa Craig on Royal Terrace which is a cheap/crap hotel that might strike a cheap deal to fill a spare room.
All manner of unsavoury characters roam them.