Can you share the screenshot where the user is logging in actually ?
You are most probably talking about the Azure AD Domain Services which are capable of pushing GPO down to devices.
Loop back processing would mostly look for the place (OU) where the computer policies are stored and will only process computer policy and not the user policy.
You need to make sure that the user policy is also present in the same location for it to process.
Let me know if you have any questions.
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