Hi Sue - we encountered this issue last year (2014). It was a change in policy by Yahoo that triggered the rejections from all providers. It is because Moodle issues emails using the student's email address, and in the case of Yahoo they are flagging any emails not generated from their servers as being a security risk. Read: http://www.pcworld.com/article/2141120/yahoo-email-antispoofing-policy-breaks-mailing-lists.html for an explanation.
In our case, instead of using Meg's solution, we have changed our provisioning to substitute any user's yahoo email address to our college provided Office 365 address and send them an email at their yahoo address to explain the switch. We opted to do this rather than prevent Moodle using student email addresses as our lecturers find it very useful to be able to reply to emails and have them go straight back to the student. If you prevent moodle using the student's email address it gets substituted with a 'Do not reply' address that obv. can't be replied to.
Hope this helps.