Alumnus embraced by schmuck, virtually worthless (3-3)
I believe the answer is:
two-bit
'virtually worthless' is the definition.
(two-bit can mean worthless or poor-quality)
'alumnus embraced by schmuck' is the wordplay.
'alumnus' becomes 'ob' (old boy, as in an old private school pupil).
'embraced by' means one lot of letters goes inside another.
'schmuck' becomes 'twit' (both can mean a fool).
'ob' going into 'twit' is 'TWO-BIT'.
(Other definitions for two-bit that I've seen before include "Cheap - insignificant" , "Cheap, worthless (US)" , "Cheap (US colloq.)" , "Paltry" , "Inferior - cheap" .)