A C172 instructor pilot reported he and his student descended 1;000 FT below charted altitude on a practice IFR approach in IMC.

Narrative

My student and I were operating an instrument training flight under IFR in IMC. We began our third approach for the day; being cleared for the LOC approach. Upon crossing the IAF we tracked the localizer outbound maintaining our minimum outbound altitude of 2;900 MSL and executed our procedure turn. Upon intercepting the localizer inbound on the approach my student queried me on the final MDA altitude because it had been temporarily increased per an FDC NOTAM. I gave him the altitude and we began our descent to our inbound altitude of 2;600 MSL. This altitude was to be maintained until crossing the FAF and a descent made to the MDA of 1;520 MSL. However; before reaching the FAF my student descended below 2;600 MSL and reached 1;600 MSL before Tower relayed to us that the local TRACON was receiving a low altitude alert for us and we immediately began a climb back to 2;600 MSL. We terminated the approach with the assigned missed approach procedure. After the flight I discussed with my student what had gone wrong on the approach that caused us to descend below a minimum altitude and be in violation of FAR 91.175. He said that when we intercepted the localizer inbound he forgot about the 2;600 MSL altitude restriction to the FAF and began a descent to the MDA. Also; he said that he had begun to brief the approach; but because of instructions communicated from ATC; he got distracted and never finished the approach briefing. As the instructor; I was scanning the instruments during the approach and believe that my mistake was two-fold: I misinterpreted the altimeter and believed that we were at or above our minimum altitudes and since the prior two approaches my student flew were well executed I believe that I was not as careful to double check what he was doing with the approach plate. My student and I both recognize the seriousness of our mistakes and have learned lessons from it. He has a much better understanding of the challenges of flying in IMC; the importance of thoroughly briefing each approach; and the necessity of accurately monitoring the progress of the approach in the cockpit. I have learned that no matter what the skill level of the student; I must be constantly checking the student's flying and instrument information while being sure to carefully and properly interpret what I see. It is our desire to take the experience and lessons that we learned and do our best to ensure that a situation like this never occurs again in our flying.