How to supervise an undergraduate reading a paper for the first time? I am helping supervise a senior student who is reading a scientific research paper for the first time. The goal is to understand a portion of this paper and write an essay presenting the background, and filling in the details.

The student has not brought anything concrete the past few meetings. I can see that they are struggling with the setup, and I am not sure how much do I let them struggle without spoonfeeding them the details. They also overestimate how much they really know and or understand, and clearly show that they feel bad about themselves when I point that out.

We are not pressed to produce something substantial. My own goal is for them to develop skills that are going to make their life easier later on. I have no experience how to manage this human part of the project.
I would ask the student for a written summary of the paper as they understand it along with a list of questions they have about the parts they don't understand. This can give you an idea of whether they are on the right track or not. 

Make sure that they understand that it is just a summary (main points) not just a restatement of the whole paper, which might be able to be done with little real understanding. What is important about the paper. 

The questions are also helpful for your guidance. But you don't necessarily need to answer the questions. If the student is diligent, then you can help them by pointing to how they can answer the questions themselves: a book or some computation, whatever. 

A couple of cycles of this and they might even have an outline of their final report. 

There is another benefit to the student, actually. They not only get to practice writing, but they get to plan what they say and the questions they ask. This is probably more comfortable to many students than facing a professor who asks them questions that they need to quickly come up with a response for. Some students will freeze up and seem to know less than they really do.