Interestingly enough, German was the most commonly spoken non-English language in the Midwest, up until the outbreak of World War I. As you stated, German Immigrants were made up huge portions of large Midwestern cites like Chicago, Milwaukee, Cincinnati and St. Louis. The German speaking element was so large in fact, that many of these cities had successful German-language newspapers. The Illinois Staats-Zeitung, along with the Westliche Post and Anzieger des Westens in St. Louis, were the three most successful German language Newspapers in the Midwest in the middle to late 19th century.
However, During World War I, German Americans faced heavy discrimination from many sources, from the US Government (The DoJ created a list of 480,000 German immigrants in the US, resulting in over 4,000 Germans being interred during 1917-1918), to mobs (Robert Prager was lynched under suspicion of being a spy). Even Teddy Roosevelt, in a speech given to the Knights Of Columbus in New York stated,
There is no room in this country for hyphenated Americanism. When I refer to hyphenated Americans, I do not refer to naturalized Americans. Some of the very best Americans I have ever known were naturalized Americans, Americans born abroad. But a hyphenated American is not an American at all"
This sort of nationalism ran rampant during the turn of the 20th century, and helped create the political climate for legislation on foreign languages.
Many states had some restriction type on the use of foreign languages, but with the 1918 Babel Proclamation made by The Governor of Iowa, and well as Nebraska with the Simian Act, went as far as to ban the teaching of foreign languages in schools. The Simian Act was overturned by the US Supreme Court in Meyer v. Nebraska(1923) but at this point, the damage had been done. German-Americans at this point had already begun to Americanize their names, and limit their use of German in public areas, including churches.
Sources:
German still has a strong presence throughout the Midwest, as the third most spoken language after English and Spanish. I remember travelling through the Midwest and listening to German radio programs in Western Pennsylvania - but I'll get to your question.
There are three main factors that drove the decline of the German speaking populations in the Midwest and the United States as a whole - the cultural dominance of English as the language of the elites, a reduction in the number of new immigrants, and the First World War.
Proportionally, the 19th century saw a massive influx of German immigrants to the United States, peaking in the 1880s as then sharply trailing off. As the economic situation of newly united Germany improved, many would-be migrants found themselves well-off enough in Germany. Why migrate to a foreign land when money, family, and a future can be found right at home? While the 1880s would see roughly 1.4 million Germans emigrate to the United States, the 1890s saw only 500,000 emigrate, and the 1910s saw roughly 340,000 emigrate.
Further, notions that we have today regarding immigrant culture and and the need for immigrants to assimilate to "American Culture" existed in the late 19th and early 20th century as well. Iconography in English-speaking publications depicted Germans as drunkards and terrorists (remember - Germans were highly active in early union movements, particularly cigar making, and we're in the age of the temperance movement). The second generation would often be looking to escape these associations so that they could improve their lot in life. The desire for upward mobility is no stranger to any generation or era. On top of this, the early 20th century also saw the steady growth of media culture: English speaking/text film and radio were growing in popularity, and German singing choirs and cultural Vereine were consolidating and losing members.
The First World War also played a major factor. Across the Midwest, Germans were coerced into purchasing liberty bonds, German newspaper and books had their circulation banned or censored by the Postmaster General, President Wilson, on more than one occasion, implied even before 1917 that German-Americans were traitors to the United States for harboring positive feelings about Germany, and in rare cases, German speaking Americans were physically accosted.
By the 1920s, most German-American newspapers had converted to English, German-American Lutheran churches were conducting services in English, and German-American families were less likely to speak German in the household. After the Anti-German hysteria of the First World War, as a whole, the German-American communities of the Midwest just looked to move on.
Edit: Formatting
Follow up question: Cincinnati is quite known for it's German heritage. They had lots of German-only speakers, and even German newspapers. When did this fall out of favor? Why?
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