So, you have students nested within schools. X2RTHETK1, X2MTHETK1, and x1ageent are student-level variables. S2NMRETK is a school-level variable. I presume Retained is binary.
If your clusters (schools) are independent, then there is no need "to allow the cluster-level residuals to be correlated". I think what you might be thinking is to allow nonzero covariances among the random intercept and random slopes for X2RTHETK1_cwc and X2MTHETK1_cwc which would be accomplished by
random intercept X2RTHETK1_cwc X2MTHETK1_cwc/ subject=s2_id type=un;
The "Estimated G matrix is not positive definite." message occurs because one or more variances/covariances have been set to zero, which might be due to the (co)variance being very small or to inadequate data support for its estimation or to an estimation method that is less optimal (binary response data can be problematic). You could try various adjustments to the model such as using Laplace estimation; see the papers by Kiernan, Tao, and Gibbs (2012) and Tao, Kiernan and Gibbs (2015) for this and other ideas.
With binary response data, you will not need a random _residual_ statement.
If you have not already done so, you would probably find value in reading in detail about multilevel modeling; there is an extensive list or resources here.
I hope this helps.
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