Musette was a freshman from Snake Hall that Damien dated last year. It is unclear what, precisely, occured but she seems to have been expelled - or she left and never came back. In either case, she isn't here as a sophmore this year.
The details of what exactly occured to cause Musette to leave the school are extremely unclear. While you can ask three people (Damien, Angela, and Isobel), each story has points that contradict with each other. Damien claims that she researched into forbidden magics even after he tried to discourage her from doing so, and she was expelled for it; Angela claims that Damien did something that caused Musette to get expelled. Isobel claims that Musette chose to leave because she was a Wildseed and gave up on the magical world.
If Angela is telling the truth, it is possible that Damien mentioned something - perhaps a type of obscure magic, or something about his demonic heritage - to Musette that he knew would catch her interest and then told her that she would get expelled if she was caught reading about it, knowing that she would be likely to research into it anways.
On Ellen's path, Minnie says that Musette was expelled for trying to mix magic and technology, and that she "had a good reason" (which isn't explained) but that wasn't enough to protect her. Minnie doesn't mention Damien at all.