You can reset a student's progress on a particular exercise by going into that student's code editor. When viewing the student's code that you want to reset, go to the "More" tab and click "Teacher." This will allow you to reset the problem for the student. This will update their progress to "not started" (in gray) and make their code editor display the starting code for the problem.
When you click "Reset this problem," this window will appear. Click "okay." This will delete the code currently in their program and replace it with the starting code for the problem. Please note that this does not delete code history, which can still be viewed in the "History" tab under "More" for Pro users.