I fixed my issue.
I guess at one point early in my server installation I used sudo snap install mosquitto to download mosquitto and subscribe to my MQTT broker, probably because a tutorial somewhere told me to. Removing mosquitto from snap and installing it through apt-get now allows me to edit the passwordfile.
Still not entirely sure why snap didn’t have access to the proper directories, maybe it has an issue with that directory being mounted to my mosquitto container, but regardless it is working now.