ON 04-02-87, A PIPER PA-38-112, N5540E, OWNED AND OPERATED BY SOUTHWEST TEXAS JUNIOR COLLEGE, IMPACTED THE TERRAIN NEAR UVALDE, TX. THE FLIGHT WAS CONDUCTED FOR TRAINING PURPOSES. VISUAL METEOROLOGICAL CONDITIONS PREVAILED AT THE TIME OF THE ACCIDENT. THE FLIGHT INSTRUCTOR INITIATED A SIMULATED ENGINE FAILURE AND DID NOT ATTEMPT RECOVERY UNTIL REACHING AN ALTITUDE OF APPROXIMATELY 150 FT AGL. WRITTEN DIRECTIVES CALL FOR RECOVERY PRIOR TO REACHING 200 FT AGL. THE SELECTED FORCED LANDING AREA WAS UNSUITABLE IN THAT IT WAS ROUGH TERRAIN SURROUNDED ON TWO SIDES BY TRANSMISSION POWER LINES. THE FLIGHT INSTRUCTOR STATED THAT THE ENGINE RESPONDED NORMALLY DURING THE RECOVERY ATTEMPT. HOWEVER, THE AIRCRAFT ENTERED A HIGH SINK RATE AND RECOVERY COULD NOT BE COMPLETED PRIOR TO IMPACTING THE TERRAIN. THE AIRCRAFT WAS SUBSTANTIALLY DAMAGED. THE FLIGHT INSTRUCTOR SUSTAINED MINOR INJURIES. THE STUDENT PILOT WAS UNINJURED.