How to add cloud-config yaml to DO droplet through Terraform?

Question

I'm not able to pass a yaml file through the user-data parameter as pointed out in this Terraform Tutorial. Not sure why the yaml file is not working. To test I was able to pass a shell script. So no reason for the yaml file not to work unless im missing something...

Here is my replication:

resource "digitalocean_droplet" "web" {

  image  = "docker-20-04"
  name   = "web"
  region = "nyc3"
  size   = "s-1vcpu-1gb"
  ...

  user_data = file("scripts/cloud-config.yaml") #This does not work!
}

Building the droplet like so causes an VM error and does not allow me to SSH into my droplet...

I am however able to literally write the #cloud-config as the parameter like so:

   user_data = <<EOF
               #cloud-config
               packages:
                 - build-essential
                 - libjpeg62-dev
                 - zlib1g-dev
                 - libwebp-dev
                 - libpq-dev
                 - postgresql
                 - postgresql-contrib
               runcmd:
                 - sed -i -e '/^Port/s/^.*$/Port 4444/' /etc/ssh/sshd_config
                 - sed -i -e '/^PermitRootLogin/s/^.*$/PermitRootLogin no/' /etc/ssh/sshd_config
                 - sed -i -e '$aAllowUsers safeplate' /etc/ssh/sshd_config
                 - service ssh restart
                EOF
               # This works, but I would rather pass a config file.

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Is the Terraform Tutorial out-dated? Why can I not pass a config yaml in the way I replicated above?