This may vary with the field. I think it's true of say, web development, because the student could definitely work freelance and get both experience and money.

This may vary with the field. I think it's true of say, web development, because the student could definitely work freelance and get both experience and money. But it might not be true of journalism, or law, etc. Although it's definitely true that by offering money and/or other perks, the company would get better candidates. Think about how easily Google can choose the best engineers, based on their reputation as an awesome place to work. Now think how much lower a college student's standards are for what's awesome - they've probably never made real money. "They buy you lunch every day" would count as awesome, and doesn't cost much. "They review your work with you every week and help you improve, then write you a good recommendation" would be even better for highly-motivated students. If a company became known as the coolest place for students to work, they'd be able to pick the best students for their internships, and those students would be more likely to come back to work there, or recommend good people to work there, after they graduate.