My toddler is saying the N word

I need some major advise. My 3yo son just started a new daycare to join his baby brother at the same facility. He just started this week and my wife received a call from the director. She stated that my son has been using the N word repeatedly and is even pointing to people of color and using it to describe a person.He does not have the greatest of speech yet but the director says there is no mistaking what he is saying. My wife and I never use those words and we are really embarrassed by this. We cannot figure out for the life of us where he learned it other then maybe his last daycare. We have not heard him use it at home or when we are in public either. We are Caucasian and a military family so our social circle is very diverse and he has never said anything negative to any of them and they all love my son to death. I am not sure how I should approach this with his daycare and if I should discipline him or if he even knows what he is saying. I feel terrible and I do not want the other children or parents to think that this is something we tolerate. Any advise is appreciated. via /r/Parenting https://ift.tt/2Zb8hsu