First, try a brand new needle.
Second, consider using a better quality thread. By all means, AVOID old or bargain bin threads. Coats & Clark used to be a standard, but thread quality has improved over the past few years, so you may want to check out other brands like Aurafil, Superior, Isacord, etc. Also, cotton wrapped polyester thread releases thread lint that contributes to build-up of gunk in the machine. Some sewists have noted that they experience more sewing issues when using C&C threads. However, some machines will do better with certain thread brands than others, so some experimentation may be beneficial.
Third, check the stitch on your sample again. Generally, when thread loops appear on the underside of the fabric, it is the upper thread that is the problem. If loopy threads appear on the top of the fabric, it is the bobbin thread that is the issue. You can even use a different color in the top to help distinguish which thread is the problem.
Fourth, when threading the upper thread, Always Raise the Presser Foot during the threading process so the tension disk is released and the thread can seat properly. "Bird nesting" occurs when the thread is not seated in the tension disk.
Sewing Machine Thread Bunching Up Here Why
Birds nest under the fabric big loops of thread top side looks good...
Fifth, when the upper thread appears on the underside of the fabric, the upper thread tension is too loose. If the bobbin thread appears on the top of the fabric, the tension thread is too tight (or the bobbin thread is loose). Start out with the upper tension set at the midway point and tweak it from that point. The tension is ideal when both upper and bobbin threads meet in the middle of the fabric.
Also, remember that tension is not static--a tension setting for chiffon will most likely not work on cotton or denim. Get comfortable adjusting the tension to suit the project you are sewing.