Throughout the books, Draco Malfoy refers to Muggle-borns as Mudbloods, sometimes openly, in the midst of a large crowd of students.
Especially in the early books, before the return of Voldemort. The time when the word is first introduced, it is impressed upon how unusual it is for anyone to use it.
“No one asked your opinion, you filthy little Mudblood,” he spat.
Harry knew at once that Malfoy had said something really bad because there was an instant uproar at his words. Flint had to dive in front of Malfoy to stop Fred and George jumping on him, Alicia shrieked, “How dare you!”, and Ron plunged his hand into his robes, pulled out his wand, yelling, “You’ll pay for that one, Malfoy!” and pointed it furiously under Flint’s arm at Malfoy’s face.
Harry Potter and the Chamber of Secrets, Chapter 7
Later, when Mrs. Norris is petrified, he goes to the extent of publicly commending whoever did it, and using the word again.
Then someone shouted through the quiet. “Enemies of the Heir, beware! You’ll be next, Mudbloods!” It was Draco Malfoy. He had pushed to the front of the crowd, his cold eyes alive, his usually bloodless face flushed, as he grinned at the sight of the hanging, immobile cat.
Harry Potter and the Chamber of Secrets, Chapter 9
There were probably no teachers around just then, but they appeared immediately after. Given that this was before Voldemort returned, how did he get away with this without any consequence?
Especially as this is a school setting, how is it that no one did anything about it?
We see that it mattered a lot to Dumbledore too.
“Yeah, I got the idea from them,” said Malfoy, with a twisted smile. “I got the idea of poisoning the mead from the Mudblood Granger as well, I heard her talking in the library about Filch not recognizing potions.”
“Please do not use that offensive word in front of me,” said Dumbledore.
Malfoy gave a harsh laugh. “You care about me saying ‘Mudblood’ when I’m about to kill you?” “Yes, I do,” said Dumbledore,...
Harry Potter and the Half Blood Prince, Chapter 27
Why was this not taken more seriously?
In particular, this is strongly aligned with the views of those on the Voldemort's side, so wouldn't those in power be determined to stamp out all traces of his influence on the wizarding society?
We also know from Bob Ogden's memory, that discrimination based on blood status was already non-existent in wizarding society before Voldemort's time, some 60-70 years prior to Harry.
“Ar, that was Morfin,” said the old man indifferently. “Are you pure-blood?” he asked, suddenly aggressive. “That’s neither here nor there,” said Ogden coldly, and Harry felt his respect for Ogden rise.
Harry Potter the Half Blood Prince, Chapter 10
As for other students reluctant to report, aren't there prefects like Percy Weasley, ready to report any minor infringement?