Thanks to JDArango, I was saved from hours of debugging and goggling. I created multiple users before i saw this solution

:~$ grep -r PasswordAuthentication /etc/ssh

grep: /etc/ssh/ssh_host_ecdsa_key: Permission denied
/etc/ssh/ssh_config:#   PasswordAuthentication yes
grep: /etc/ssh/ssh_host_rsa_key: Permission denied
/etc/ssh/sshd_config.d/60-cloudimg-settings.conf:PasswordAuthentication no
grep: /etc/ssh/ssh_host_ed25519_key: Permission denied
/etc/ssh/sshd_config:PasswordAuthentication yes
/etc/ssh/sshd_config:# PasswordAuthentication.  Depending on your PAM configuration,
/etc/ssh/sshd_config:# PAM authentication, then enable this but set PasswordAuthentication

In my case, the file name is 60-cloudimg-settings.conf

:~$ sudo nano /etc/ssh/sshd_config.d/60-cloudimg-settings.conf

:~$ sudo service ssh restart

:~$ sudo systemctl restart ssh