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Refund original shipping...?

I have a return for item not as described.  I do charge for shipping.  It's my fault as the buyer found a tiny hole that I must have missed.  I noticed I have a toggle on the refund page giving me the option NOT to refund the original shipping charges.  I called eBay and was told it's a "privilege" I have for being a top-rated seller for 12 years.  What do other sellers do in a situation like this?  Obviously it's a total loss to refund the original shipping charges and I paid for return shipping as well.  Total of about 26 dollars.  What should I do?  Thanks.

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