The only hostel on San Juan Island [1], Wayfarers Rest (35 Malcolm St., www.rockisland.com/~wayfarersrest [2]) is in a comfortable home with a full kitchen just a short walk from downtown Friday Harbor. The 10-bed hostel has dorm room beds for $30 per person and private double rooms for $70. Kids are welcome.
Another cheap alternative in Friday Harbor is Orca Inn (700 Mullis St., 360/378-2724 or 877/541-6722, $84–99 d). Rooms are dated, but acceptably clean for the type of crowd that will spend most of their time out on the water anyway.
Go inland for one of the best deals on the island. States Inn B&B (360/378-6240, www.statesinn.com [3], $99–169 d) is a country home on a working ranch with sheep, chickens, and alpacas seven miles northwest of Friday Harbor. This welcoming bed-and-breakfast serves up fresh cookies in the afternoon and distinguishes itself as one of the only B&Bs on the island to offer several rooms for under $100 during peak summer months. All guest rooms have private baths. The inn caters to families and also offers a four-person cottage for $249 and a three-room suite for four for $229.
Links:
[1] http://www.moon.com/destinations/washington/san-juan-islands/san-juan-island
[2] http://www.rockisland.com/~wayfarersrest
[3] http://www.statesinn.com