There are two ways to use a 12x12-inch template on an 8.5x11-inch page.
1. You can resize the square template to a size that will fit (8x8-inches or 8.5-inches square) by getting the Crop Tool. Select the new dimensions in the Options Bar across the top of the editing window (at 300 ppi.) Click and drag out the crop around the perimeter of the template. Confirm the crop to resize the template.
You can also create the page at 12x12-inches, then change the dimensions from the print wizard (File > Print.)
2. If you would like to fill the entire 8.5x11-inch page, the best way to turn a square template into a rectangle is to create a new document that is 8.5x11 inches (300 ppi.)
Select all of the layers on the template by clicking on the top layer, holding down the Ctrl key (Mac: Cmd) and then selecting the bottom layer (this should select all the layers) and then drag the layers all at once over to your new document.
You'll have to do some resizing and rearranging to get them to fit on the new document.
Get the Move Tool. Select one of the layers to activate the bounding box around the layer. Hover the cursor over one of the four sides to pick up one of the side handles. Click and drag to stretch the item. To resize the contents of a layer, hover the cursor over the corner of the bounding box to pick up the corner handle. Click and drag toward the center of the layer to make the item smaller, drag away from the center to make it larger. In Photoshop, hold the Shift key as you drag to maintain the proportions.
For more information, check out Getting Started with Templates