Changing UPNs / Domains

I ran into the same issue and this exchange helped me, but I'd like to add that to me the big difference between the MSOL cmdlets and the Azure AD (new) cmdlets is that the MSOL cmdlet will generate a password for your profile when running it and the AzureAD cmdlets do not. 

In order to fix this issue you first have to change your UPN to match the default domain - for example @tenant.microsoft.com which is a MS domain and since that domain is not a federated one, the user account needs a password.

When setting the UPN to match the default domain using the MSOL cmdlets, I didn't get an error about password profile being empty which was great. The cmdlet worked, however, it returned a random 8 character alphanumeric word each time I executed it when the default domain (@tenant.microsoft.com) was part of the UPN.  This leads me to believe the cmdlet is generating a password and setting it as part of its process for setting the UPN when no password exists in the profile and getting around the error that the Set-AzureADUser cmdlet throws when no password is set in the profile.

When you run the cmdlet the 2nd time and set it to the federated domain name (its a 2 step process to fix this issue), the random alphanumeric 8 character word is not generated which makes sense as the domain the UPN is using is now a federated one and the user will authenticate against your on-premise ADFS instance not against an Azure owned domain (aka default domain).