Girl asked out my daughter

My daughter is 12 (7th grade) and a close friend of hers wrote her a 4pg letter about how much she likes her and wants her to be her girlfriend. 

The problem is my daughter does not feel the same but does really like this girl as her friend. The biggest problem is the little girl has A LOT of problems at home. And I mean A LOT. She has threatened suicide, stopped doing school work and told my daughter some very sad stories. My daughter did go to the school and informed them of everything she was told. And I feel she did prevent her from suicide based off of how the girl was behaving at the time. The girl is now in school counseling and the are working on the home life and per my daughter doing so much better. It's been a few months. 

My daughters problem is she's afraid to tell her no. She's afraid of what that will do to her. Will she go back to being suicidle? Will she hate her now? Will the girl not want to be her friend and then have no one to talk to? She didn't even want to go to school today. My daughter doesn't even really believe the girl likes girls. She's afraid to tell the school councler cause what if she tells her parents. 

All I could come up with is you're 12 and not allowed to date anyone. But she knows you both depend on each other as friends. Just go with that. 

What else could I tell her to say? What route does my daughter go if it does mess with her mental health? I get she will have to tell. But is there ways to prevent that I don't see?