look on your shift tower theres a plastic bracket that is probably broken.

heres a pic. http://gruvenparts.com/website/imgs/fullsize/305.jpg OeM on the right, gruven parts short shifter on the left. it minimized side to side play.

chances are your black plastic one broke and the cable has come off

Also VW says the trans is a "lifetime" trans and should have to service it, however is uses gear oil which will break down just like motor oil. I drained mine and use GM syncromesh and it cleared up my second gear grind.