I hated the ambiguous ending the first time I saw it, but now it's one of my favourite movies.
The ending makes it more sinister, in my opinion. If the killer has some connection with the girls in the sorority house, it instantly becomes less scary. Evil always seems worse when there's no reason or justification for it. In this film, we don't even know who the killer is. (Other than he mentions that his name is Billy, and refers to a never seen character called Agnes.) But that's what makes it so great. The unknown is always scarier.
Each to their own though. I don't know if you know, but there's a 2006 remake of this. Without spoiling anything, the characters have more back story in it.
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