March 3 (Bloomberg) — Harvard’s interest costs are set to increase as much as $550 million over three decades because the U.S.’s wealthiest and oldest university took advice from Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley.

Earlier, those same Wall Street banks sold Harvard — then led by Lawrence Summers, now an Obama administration adviser — derivatives that soured. When that worsened a cash squeeze, they recommended that the AAA rated school pay as much as 1.41 percentage points more than yields on identically rated corporate debt for a $1.5 billion Dec. 5 bond sale. Five days later, they helped Harvard borrow $1 billion more at up to 5.80 percent — to repay floating-rate debt that effectively cost it 3.4 percent.

By accepting those terms, the college that trained such finance-world elites as John Thain and Gary Crittenden enriched initial buyers who sold the bonds as prices rose as much as 4.7 percent in two days.   It also reduced underwriters’ risks: If the bonds hadn’t sold out, Goldman, JPMorgan and Morgan Stanley would have had to buy the rest when they were hoarding cash and relying on government guarantees to sell their own debt.

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