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It's Halloween and the students are having a blast at the costume party over at Springwood College. Marsha would rather study than party however. Someone wants to be her study friend and soon Marsha starts to have nightmares. Her dead crazy grandmother comes back to life, Marsha's boyfriend is killed and soon she finds herself in the hands of Freddy Krueger. She tries to escape by going to a dream clinic where dreams are recorded only to find out that there is no escape from Freddy.