"Cutters" is a derogatory term for the kids who "cut" (were truant from) school, and end up not going on to college after graduating from, or dropping out of, high school.
This regional slang popular especially in midwestern US college towns was given wider exposure from its use in the 1979 movie Breaking Away - the movie cover even pictures them wearing "Cutters" T-shirts they made. In Breaking Away, "Cutters" refers to the boys' parents' profession of stonecutters in the quarry. In the movie, "Cutters" are townies, sharing their community with college students their own age.
Cutters is also a pun on, or reference to, the use of a knife.
from One for the Cutters