To change the difficulty level for an individual student, select the student (make sure they are highlighted) or press the Command Key (Mac)/Control Key (Windows) to select multiple students. Then use the < and > arrows to move them to a different level. Alternatively, you can right-click and select the level you'd like to move them to.
You can also change an individual student's Difficulty Level for future assignments they open from the Gradebook page:
Note: Changing the Difficulty Level for individual students is not available for Teacher Code Writing activities. These activities only support changing the Class Difficulty level.
Changing Difficulty of an In-progress assignment
If an assignment is in-progress a icon will appear next to the student name.
Changing the difficulty of an assignment that the student already has in progress will have an additional confirmation dialog since it will reset the student assignment to the new difficulty level.