Demichelis, who has made 103 appearances for the Andalusians since joining from Bayern Munich in 2011, saw his contract expire on July 1 and will now be allowed to depart the club as a free agent.
Schuster confirmed that the 32-year-old will not remain with the Liga outfit after the two parties could not agree to new terms, with Argentine giants River Plate having offered the defender the opportunity to re-join his old club.
"Our offer has been answered," the 53-year-old told reporters at a press conference.
"We would have liked him to continue as he's a respected and important part of this team. But it seems that our ideas are different and we must accept that.
"Now we must find a replacement."
Demichelis began his senior career at River Plate before moving to Germany to join Bayern for €5 million in the summer of 2004.
If the defender does move to the Buenos Aires-based side, he may well be joined by Benfica's Pablo Aimar, who admitted he would relish the chance to return to his homeland once more.
"I think about the future and would like to return to Argentina," the 33-year-old attacking midfielder was quoted as saying by Ole.
"I very much appreciate the interest of River. While I will evaluate what I do in the coming days, I do not make decisions for myself. I have a large family and the decision affects everyone. I guess the doors are open and they are ready to come back [to Argentina]. I'm thankful to River."
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