Financial Winners and Losers: Sallie Mae

(Adds Fifth Third offering in sixth graph and Lincoln National upgrade in eighth graph; updates share prices throughout.)

Student lender Sallie Mae (SLM Quote) helped lift financial stocks on Thursday after the federal government selected it to service student loans.

Sallie shares shot up over 9% in early trading but closed up 5.5% to $8.11, after the company was chosen to service existing loans and future loans. The five-year contract covers $550 billion in outstanding loans, but does not include loan origination. However, it will be a steady source of income as the standard compensation for servicing these loans can be up to 0.5% of the loan interest payments. Sallie Mae was one of three companies chosen by the Department of Education.

Treasury Secretary Tim Geithner's testimony about new regulatory reform proposals to the Senate Banking Committee and encouraging signs in economic data combined to boost financial stocks. The NYSE Financial Sector Index was rose 1.7% to 3,859.39 and the KBW Bank Index climbed 2.9% to 36.57. ...