If “donut hole” means the lower part of the no-FA income/wealth range (probably top ~3% or $250,000+, above the “Romney middle class”), then note that kids from those families are far better represented at elite private schools than those with Pell grants (probably bottom half or so). No-FA students make up around half of those at the elite private schools, while Pell grant students usually make up one tenth to one fifth. As discussed frequently on these forums, high stats is no guarantee of admission to an elite private school; the high income “donut hole” family kids have substantial advantages in getting admitted to such schools compared to the Pell grant kids.
In terms of merit scholarships for stats alone, students from both high and middle/low income families can seek them, so it is not like the “donut hole” family kids are any worse off in this respect than the Pell grant kids. But it is very likely that the “donut hole” family kids’ parents will be able to contribute college money that gives them far more college choices than the Pell grant kids, who are more likely to have a choice limited to (a) elite private school with good FA (if in the unlikely event they are admitted), (b) full ride merit (automatic ones exist, but are not that common; competitive ones should be seen as reaches), or (c) commuting to a local community college or (probably non-flagship) state university.