SMA SEL TRNEE ACFT FAILS TO FOLLOW THE LOC COURSE DURING APCH DUE TO A MALFUNCTIONING HDG INDICATOR.

Narrative

MY STUDENT WAS FLYING THE AIRPLANE; SETTING UP FOR THE LOC APCH INTO SANTA BARBARA. WE WERE AT 2000 FT AND A HDG OF 075 DEGS. I INSTRUCTED MY STUDENT TO TURN R 5 DEGS TO STAY ON THE LOC. MEANWHILE; I WAS SWITCHING FREQS ON THE VOR IN ORDER TO IDENT AN INTXN. WE ONLY HAD 1 VOR SO I WAS BUSY SWITCHING FROM THE LOC TO THE VOR. ALSO; WE WERE IN AND OUT OF THE CLOUDS. THE TOPS WERE RAGGED; FROM 1800-2000 FT. AFTER SWITCHING FREQS I LOOKED AND SAW THAT THE HDG INDICATOR INDICATED 250 DEGS; AND MY STUDENT AND I WERE MOMENTARILY CONFUSED. IN PANIC; I BEGAN AN IMMEDIATE TURN BACK TO 075 DEGS. NOT REALIZING THAT WE HAD A MALFUNCTION OF THE HDG INDICATOR; I TURNED US WELL OFF COURSE. I THEN LOOKED AT THE ALTIMETER AND IT INDICATED 300 FT BELOW THE ASSIGNED ALT OF 2000 FT; AND WE WERE STILL DSNDING. I IMMEDIATELY BEGAN CLBING AS THE TWR ADVISED ME OF THE LOSS IN ALT. TWR THEN HANDED US OFF TO APCH AND THEY VECTORED US AWAY FROM THE COURSE AND ABOVE THE CLOUDS. THERE WERE 2 MAIN FACTORS IN THIS SIT. THE FIRST WAS POOR JUDGEMENT. I PUT TOO MUCH CONFIDENCE IN MY STUDENT; AND I SHOULD HAVE BEEN WATCHING MORE CLOSELY. THE OTHER FACTOR WAS THE MALFUNCTION OF THE HDG INDICATOR. MY STUDENT ADVISED ME LATER THAT HE SAW THE HDG INDICATOR SPIN OFF COURSE.