Sounded like the nerdy teacher was just trying to be hip with his young students. ...well, he got the education this time.
What is missing is the argment that there is reverse racism involved here.
All of the students are calling each other "Nigga," and it's cool, but they first examine the skin color of the person uttering the word.
If skin color = "white" then the person is a racist.
What if a white guy calls a white guy a "Nigga" for fun, is it racist?