I don't know much about military training, but I do know that grouping students into "squadrons" is done today - I don't know that the grouping is based on anything, but it makes a certain kind of sense that Starfleet would embrace a kind of "meritocracy" approach to it, even if it also comes off as elitist.
Perhaps Nova Squadron is a long-held academy tradition, and despite the initial fallout of the 2368 incident, that’s overshadowed by its long history of outstanding cadets, a legacy the academy didn’t want to suddenly erase.
I think this is likely. Scandals come and go, but they often don't overpower institutional inertia.