The third technological disrupter for the education industry will be economics. The theory of disruptive innovation says that for a new innovation to be “disruptive” it must create a new market for that product or service – not simply displace companies that fall behind in adopting new technologies. The mass production of automobiles is often cited as an example of disruptive innovation, because that innovation lowered the cost enough to make the car affordable to a population that would not have been able to afford it before the price changes.

In education, we are seeing tremendous price pressures. College tuition has increased beyond the rate of inflation for years. Prior to the global financial crisis, increases were averaging 6% and since they’ve been in the mid-4% range.

With the total cost for a year at a private four-year college approaching $43,000 in 2011, it is no wonder the cost of college and the availability of college loans has become such a significant political issue.

While costs for in-state public universities are considerably less, the data shows that only half of students are graduating from college within six years – unfortunately causing many to question the value of the investment altogether.

Cost, accessibility, and debt are some of the reasons why there is such interest in the experimentation with alternative schools that I discussed in the earlier post on The Long Tail.

Interestingly, one source of innovation in the secondary education market can also be traced back to Stanford — which has recently opened an accredited, degree-granting online high school. This private school is limited to gifted and talented students, but perhaps the most eye-popping feature is its tuition. In a world where brand-name independent school tuition on the East Coast can exceed $40,000 a year, Stanford set its tuition at $15,000. This model is opening up new markets to students from around the world in the same way that Virtual High School courses can offer elective opportunities to students at Marshall that would not be available without the program or the way 40% of US high schools that don’t offer AP courses can now offer online options to fill real program shortcomings.

In the public sector, online charter schools have begun to compete for students across the United States. In Minnesota, the Department of Education recognizes 29 online schools. When the Montana Digital Academy opened its virtual doors two years ago, 200 students were taking classes. At the end of this year, it is projected online student enrollment will top 7,000 students. The average virtual school growth rate in the US is between 20% and 45% a year. These changes are coming at a time when 30 states are providing less per-pupil funding to their public schools than four years ago.

There is considerable controversy around the for-profit sector that has been behind many of the new online charter schools, however, with a US Department of Education study showing that online and blended learning can offer a level of quality at par or better than face-to-face instruction, economics will continue to push organizations and states to experiment with these new educational models.

This wraps up our discussion of disruptive innovation and the three areas that will likely most impact education. In my next post, we will begin to look at how the changes in our student population (Generation X parents and their Generation Y/Z children) will accelerate the adoption of new educational models to fit changing cultural norms.