Numerous hostels and Spanish schools around Granada offer volunteer programs, but nearly all are affiliated with two institutions: Carita Feliz and La Esperanza. The former is a Spanish-based NGO, the latter is Nicaraguan-run. We've heard good and bad things about both institutions, but there's no doubting the benefits they provide to the communities here. Check them both out to see which program fits better with your plans and schedule.
Michael Karanicolas is awesome.