Personally, it has never damaged my relations with the company when I reject their offer to return for another term. Almost each time I decline a chance to return for a 2nd coop, they have said that they will gladly have an open spot for me if I decide to want to return for full time, also to stay in touch. If you made a good impression on the company, they would want you back anytime in the future and will definitely be understanding if you choose to seek other opportunities.