It depends what you mean by certified grammatician (or grammarian?). The forums here are monitored by Manhattan Prep instructors: we're all 99th percentile test takers with a good knowledge of the GMAT test. We're not grammar academics, if that's what you mean.
More importantly, however, we're not trying to teach advanced grammatical analysis (which, to my best knowledge, is a field with quite a few controversies). We're trying to help students improve at the GMAT, and I fully admit that we simplify or avoid some of the more subtle grammatical issues for the sake of ease of learning and practical application.
However, I disagree with your analysis of the sentence:
"colleges and universities admitting students based on their academic merit is a relatively new phenomenon...." admitting students is not modifying colleges and universities; it's again a complex noun phrase where admitting is a gerund with the subject of "college and universities", direct object of "students", and adverbial modifier "based on their merit".
If the word 'admitting' were a gerund (i.e. a noun made out of a verb), then 'colleges and universities' would need to be a possessive form. To take a simpler example:
Steve is a great guy.
He leaving the party early made it less fun.
(This is incorrect - hopefully it sounds odd.)Steve is a great guy.
His leaving the party early made it less fun.
(This is okay.)To bring it back to the example above, we'd need to write:
Colleges' and
universities' admitting students based on their academic merit is a relatively new phenomenon.
Now, on a more local point, GMAT really doesn't favor this kind of extended noun phrase and we could be pretty suspicious of it as an awkward in any case.