The first thing I usually tell parents is that participation in sports is often an indicator of success in college. What do I mean? Varsity athletes tend to have higher GPAs and are more satisfied with their college experience.
However, being a Division I athlete is a huge commitment. One must eat, sleep, and breathe one's sport. Further, Division I athletes must commit to playing all four years if they want to keep their athletic scholarship.
While Division III schools do not offer athletic scholarships, they do recruit athletes in a different way. Every school with a soccer team (for example) wants to fill its roster with good players who can take a league championship. Thus many colleges offer other forms of scholarship money to entice an able player to join its team--and its student body.
The art of the admissions officer is to build a well-rounded class. And in order to do this, they have to meet the needs of the coaches (among others).
My advice to parents was to relax a bit. Their kids can still find colleges at which they can have a satisfying varsity athletic experience--and still focus on their school work and also allow them to explore other activities. It's also possible that a Division III athlete will receive some sort of scholarship to entice them to play for the college team.
While some kids are seeking the excitement of serious competition at the Division I level, the majority of players that I meet as a college consultant are unlikely to achieve that level of competition.