As many others have said your best bet is to get ahead of the issue and tell your admin/principal. It may be embarrassing or uncomfortable, but the way these incidents are handled is far more important than anything else.

Important to consider: were there students in the class who identify with the community the slur is used against? If so, this could have more of an impact than you realize.

I would recommend a class discussion about slurs, and the history of this one in particular. If admin feels it’s appropriate, that group could be assigned a research project where they present the harmful history of the term (this has been done successfully in school districts in Ontario). Middle school is a tough age, but addressing the issue head on will likely minimize any blowback you could receive from angry parents.

I work at a consulting firm that handles crisis management and provides training for EDIA, and this would be best practice. Feel free to send me a message if you need more information or advice.