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I've made no secret of my general disdain for the for-profit education industry -- whether it is higher education or K-12. Misleading recruiting tactics, graduates exiting the schools with crippling debt, and a general lack of accountability are enough to leave an awful taste in one's mouth.

But a speech by innovation guru Clayton Christensen recently gave me reason to pause. Could it be that online education is the next great disruptor?

A compelling vision
I'll get to answering that question in a second, but first I want to review a compelling opinion piece written by Bridgepoint Education's (NYSE: BPI  ) Ashford University President Elizabeth Tice last month.

In her op-ed titled "Online Learning Keeps Evolving," she states: "The rapid adoption and expansion of online education is closely tied to the growth of technology, the Internet and other new ways of delivering knowledge to more students beyond the previous boundaries of place, time and expense."

She had stats to back up her assertions, too. Among them:

  • Online enrollment now represents 31.3% of all higher education enrollments.
  • From 2002 to 2010, online learning grew at a compounded annual rate of 18.3%, versus an annual rate of 2% for higher education writ large.
  • And maybe most importantly, 67% of respondents said online college classes were "the same or superior" to face-to-face classes, up from 57% in 2003.

Such numbers are telling and are important for any investment thesis in the for-profit space. Does this mean I think for-profit companies are a screaming buy right now? Not quite. Here's why.

A bear case
In the same piece, Tice states that, "In recent years, traditional schools have begun to add online curriculum. ... Community colleges are adding online courses both to meet student demand and to control education costs due to reduced state budgets."

One of the key advantages that many of these for-profit schools had to begin with was the fact that they were the only ones offering comprehensive classes online. If state schools and community colleges started offering the same thing, much of that advantage would erode.

This is especially true in situations where community colleges are significantly cheaper than their for-profit peers.

A bull case
But that's just one way to look at the situation. An alternative hypothesis becomes available when we look at the changing landscape in traditional school tuition. As fellow Fool Morgan Housel pointed out, "By and large, tuition is going up not because schools are raking in more money, but because subsidies are going down."

And one of the most unfortunate things about this is that while students are paying more for their education, it doesn't necessarily mean the quality they are receiving is increasing proportionately. One could easily make the case, then, that the equation that helps make education affordable for all students is broken.

At some point, for-profit schools could simply become the more cost-effective option. In such a case, some would argue, for-profit schools could take on the overhead of running schools, while the government could focus more on providing loans than on maintaining campuses.

What's a Fool to do?
Without a doubt the education industry is ripe for innovation. Just this month, Apple announced it was going to basically re-write the rules of textbook publishing. Christensen believes New Oriental Education  (NYSE: EDU  ) will be setting the trend for online education in China, and he's putting his money where his mouth is.

In reality, there's no way to tell whether the for-profit bulls or bears will be right. This is disruptive innovation, and by its very nature, disruptive innovation can be difficult to predict.

I know that if I were placing bets, I'd stay away from industry laggard Corinthian Colleges  (Nasdaq: COCO  ) , which has sky-high rates of loan defaults by graduates and shrinking enrollments. I'd devote more time to two providers I feel much better about: the aforementioned Bridgepoint, as well as American Public University  (Nasdaq: APEI  ) -- which started out primarily serving the armed forces and has since expanded to offering reasonably priced degrees to civilians as well.

I don't own any of these stocks in real life, but the more I think about it, the more I don't want to bet against certain for-profit educators, that's why I've canceled my bearish calls on these companies in my CAPS profile, and will be watching them closely as 2012 rolls on.

If disruptive innovators are your type of investment, then I highly recommend our latest special free report: "Discover the Next Rule-Breaking Multibagger." Inside, you'll hear about a company that Chief Rule Breaker and Fool co-founder David Gardner thinks could be the next monster stock in many a portfolio. Get your copy of the report today, absolutely free!

Fool contributor Brian Stoffel owns shares of Apple. You can follow him on Twitter at @TMFStoffel.

The Motley Fool owns shares of American Public Education, Bridgepoint Education, and Apple. Motley Fool newsletter services have recommended buying shares of American Public Education, New Oriental Education & Technology Group, and Apple, and creating a put write position in Bridgepoint Education. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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