Your players will still have the same skill level but a 5 star player will become a 4 star player and in the following season you will find higher skilled players on the market.
So far it for me it's been a game of constant upgrading. Each season I will "trim the fat" and sell lesser players who I don't think will level up to 5 stars or more and try to buy players who I think will.
I have had one scout player (who I named Diego Maradonna) who I have had for maybe 5 seasons now. This is the first season that he has not risen to a 6 star player. :-( he has scored more league goals than league games he has played though. Absolute legend!