The term became popular on the Knox College campus when alumnus George Fitch used the term to describe a college similar to Knox in a fictional story he published, "Good Old Siwash College". Students informally used the term to describe Knox and later the school formally adopted Siwash as the nickname for the college.
Siwash was used heavily in the Pacific Northwest, British Columbia and Alaska from the 19th century through World War II. A term in Chinook Jargon to refer to a native person. The term was not originally meant to be offensive, but it was a term that "othered" native people in the area during the rise of cities like Seattle and Vancouver. Over time, the term (from the French "sauvage", meaning wild or savage) developed the overtly offensive connotation it holds today.
Knox County, Seattle and Siwash
The white "founders" of Seattle, called the Denny Party, took off for the northwest from a town they called Cherry Grove, IL. Now called Cedar, this town is located eight miles south of Galesburg and Knox College. Whether the term traveled from Knox County to the northwest (unlikely) or traveled back from early Seattleites to their friends and family back home (more likely) is not yet known.
The term Siwash is, for some reason, still a controversial issue for alumni. The school supposedly lost a lot of donations (though this has not been confirmed or recorded to the best of my knowledge) from alumni who were angry that the school had caved to demands for a more politically correct school nickname.
During Homecoming 2010, those alumni who were still die-hard Siwash weren't allowed to have their table on campus, so they set up camp in Standish Park instead.