Paul never says that Sarah’s reasoning is circular. Paul actually accepts Sarah's definition of what counts as volunteering, but he introduces a consideration that her argument does not consider.

Paul never says that Sarah's definition of volunteering is too narrow. He seems to accept her definition, but points out that down the line--after students have been required to do community service, which Sarah doesn't consider volunteering--some students may willingly do something similar, which does count as volunteering by Sarah's definition. So Paul says that, by Sarah's definition, some students actually volunteer later: but he doesn't say that Sarah's definition of volunteering itself is too limited or excludes certain activities--e.g. community service versus volunteering for a nonprofit.

Sarah’s assumption is that forcing a person to volunteer cannot instill a habit of volunteering: i.e., she assumes that forcing someone to volunteer will not lead them to actually volunteer on their own accord. Paul counters this by pointing out some instances where students afterwards volunteer on their own because they enjoyed doing it as a requirement.

Paul never questions or even mentions Sarah’s motives.

Paul never suggests an alternative policy. Instead, he points out a potential consequence of the same policy Sarah is criticizing.