Some claim that the word can be defused through reclaiming it. However, most adults continue to view the word as offensive and harmful. Five seconds before that word is used, everyone in class might have been your friend. But now you're reassessing yourself, and they're reassessing you. It has a profound effect.
Nothing is the same after it is used.
The feelings and reaction of students may depend on the demographics of the student population. When African American students are in the minority, however, they often feel embarrassed and singled out. It's equally important, however, to address the issue regardless of whether the class is racially mixed or homogeneous. Different teachers handle the word in different ways. Some never use it, and will not allow students to use it.