The former Germany international has told the Spanish goalkeeper he should look for the chance to join another club in order to prolong his career at the top of the game
The Spain goalkeeper admitted earlier this week he could be tempted to leave his boyhood side if he continues to play second fiddle to Diego Lopez, and the former Blancos boss feels a move to another top side in Europe could be vital at this stage of his career.
"[Casillas is] taking all of this with a great deal of calm and dignity," he told reporters at a press conference. "It must be incredibly difficult for him. It's the toughest thing that can happen to a player who has won everything and then suddenly finds themselves in a situation like this.
"But the nice thing about football is that it never leaves you out on a limb forever; there's always a solution and for what he is going through, he has to search for it. Where there's a will, there's a way.
"Iker is at the age where he can play for one of the big clubs so that he can keep his place in the national side. Life doesn't begin and end with Real Madrid; there are other places and other great teams.
"I can understand that for him, it's not that easy because he has been at Madrid for most of his life. But in football, when your time is up, you have to carry on. We could never have imagined that Raul would end up playing in Qatar – everyone thought he would retire at Real Madrid. Look at [Victor] Valdes...
"These things happen in football but the nice thing is that there is a place for everyone."
Schuster takes his Malaga side to Madrid on Saturday and admits he is relishing the prospect of returning to the Santiago Bernabeu, where he hinted at a possible tactical surprise for the hosts.
"We’ll take off a midfielder and deploy an extra forward. There's a player who many of you won’t be expecting to play but I think he can do a good job for us tomorrow," continued the German.
"I'm delighted to be able to return to the Bernabeu, it's the first time for me since I left Madrid. I've told the lads that they will love playing there, the home fans always take notice of the rival team – I've even seen them applaud the opposing side which is fantastic to see."
Madrid boss Carlo Ancelotti confessed this week that his side have been under-performing so far this season, but Schuster believes his opposite number may have been better off keeping his thoughts to himself, while also warning of the quality at the Italian's disposal on Saturday.
"Sometimes, we coaches have to bite our tongue and not make any declarations that could be misinterpreted," added the 53-year-old. "At Madrid, the demands are extremely high.
"Your team has to function because you have the obligation to win trophies every year. That means that occasionally, the coach has to take measures. I myself didn't see anything wrong in what Ancelotti said but the thing is he is Real Madrid’s coach. I understand it perfectly.
"When Madrid are on song, they can give you a lot of problems. Whenever they get into their stride, whether it’s for 90 minutes, 50 or even just 10, they are very dangerous.
"They don’t need to put in a great game to best you – all they need is 10 minutes of Cristiano [Ronaldo], [Angel] Di Maria or [Karim] Benzema... and that's what makes it difficult for rival coaches to plan for these matches."