The Dropouts were a clique announced in the early developer interviews, described as students who'd dropped out of Bullworth Academy.
By the time the game came out, they had been changed into the Townies, however, they're still referred to as Dropouts in some lines of dialogue and in the data files. It is possible that the name was changed very late in the game's development because of pressure from critics and censors who had an issue with the idea of dropouts.
Out of all the Townies, all but Edgar Munsen are at least hinted to have attended Bullworth, and Edgar is the only one who flatly states he never attended it. Gurney and Otto Tyler were both expelled.