There's no need for a separate Microsoft ID - students and teachers can both sign on and use all the features of Office 365 from within their LMS of choice.
While assignments and homework can still be submitted through traditional file uploads, OneNote integration allows for Moodle to accept files straight from a student's OneDrive account. No more issues with lost files or forgotten USB sticks - let the cloud take care of your assignments.
All your OneDrive files, whether they're formatted for Office 365 or not, are available within your LMS, to download and access from any device with an Internet connection. Modify, create and share files, giving you full collaborative workflow support.