A peer-review system that automatically evaluates and provides formative feedback on free-text feedback comments of students was iteratively designed and evaluated in college and high-school classrooms. Classroom assignments required students to write paper drafts and submit them to a peer-review system. When student peers later submitted feedback comments on the papers to the system, Natural Language Processing was used to automatically evaluate peer feedback quality with respect to localization (i.e., pinpointing the source of the comment in the paper being reviewed). These evaluations in turn triggered immediate formative feedback by the system, which was designed to increase peer feedback localization whenever a feedback submission was predicted to have a ratio of localized comments less than a threshold. System feedback was dynamically generated based on the results of localization prediction. Reviewers could choose to either revise their feedback comments to address the system's feedback or could ignore the feedback. Our analysis of data from system logs demonstrates that our peer feedback localization prediction model triggered the formative feedback with high precision, particularly when peer feedback comments were written by college students. Our findings also show that although students often incorrectly disagree with the system's feedback, when they do revise their peer feedback comments, the system feedback was successful in increasing peer feedback localization (although the sample size was low). Finally, while most peer comments were revised immediately after the system feedback, the desired revision behavior also occurred further after such system feedback.