My son had similar options but was driven internally to bank on himself and not accept a D2. I wanted him to for all the reasons mentioned above but it was not my decision to make.
We had long talks about it and he chose to keep grinding past November of his senior year. By December he had multiple D1 opportunities....guaranteed roster spots but coaches that really wanted him. He chose one, accepted the loans it would take to make up the difference in what I was able to pay and is happier now then I have ever seen him.
I really think there are lots of ways to be happy and people tend to think the path their son took is the best. It would have been economically better for me had my son gone D2 but it's his experience and he was very clear with me, he did not want to be at the top of the team but to be pushed by the talent around him to keep improving...his words and feelings not mine. He had a clear vision of what he wanted and a clear understanding of what it was going to cost him to make that decision.
I think you really have to listen to your son and educate him on all the ramifications of his decision but bottom line, it's his life and his experience and sometimes the best thing we can do is support our kids choices and let the chips fall where they may.
My son has not experienced anything remotely like everyone cautions about non scholarship players. He is treated exactly like everyone else...remember 1/4 of every team has no athletic money at a minimum and often more if the school is desirable enough to attract high quality players that can pay. This is a program that finished top 25 last year and likely will start there this year too. It is competitive and he is treated identical. Contrary to what some seem to believe, my son's coaches don't see each guy by what they spent on him but by what he contributes to the team....maybe that's why they are successful?
I sure hope I can continue to post here as what at times seems like the only person with positive things to say about being a recruited roster spot. I think everything depends on individual kids and the programs they chose. Our role is to guide them but I can say with certainty, my son would not have been happy had I pushed him into something that wasn't his goal but mine.
Kids and families have great experiences at D1, D2, D3 and JC. They have great experiences as a 75% scholarship guy and as late signing walk ons. When a kid goes to college hopefully he is prepared to make his own experience and take from it the good and the bad. My son is WAY happier then some of his early commit team mates who are struggling through crushing expectations at programs not as high achieving.
Educate your son on the baseball, educational and financial implications of his decisions and if you are able to, support his choice and let him live with the consequences. Contrary to what many say, having lived it, plenty of D1 opportunities exist beyond the EARLY signing period, perhaps with out athletic money but if you are able to afford it, you will never regret letting your son pick the right college for him. I don't have the bragging rights of some of those team mates over the years but now, as they are actually in college and playing, my son is the happiest of the bunch and that's enough for me.
Good luck, there are many ways to have a great outcome