If you have $10k in equity($160-$150), you probably are paying a PMI fee, which can be a significant cost to you. Take a look at your mortgage documents and see what the costs are. The PMI could be a really big silent sucker on your budget. If you don't have PMI, great.
What is your mortgage interest rate and what payment year are you on? Take a look at your amortization schedule for your loan and find out where you are on the payments. In years 1-5, if you were to prepay about $6K on your principal, which moves you up on the principal payback amortization schedule, you will save over $11k on your interest payments. Sounds unbelievable, just add up the amounts. The trick is, if you prepay on the principal, continue with your monthly payments as if you did not make the pre-payments to principal. Your payments will remain the same and it will not feel any different, but when you get your home mortgage interest statement in January, it will reflect the decreased interest charges. If you pay a little over $6k in years 6-7, you will save over $10k. The savings will show up in your mortgage account and are tax free. Around year 13, the prepayments are about a match to your interest savings, which, I think, is still a big deal. I think the savings in interest expense or PMI in the mortgage early years are a good place to put cash now.
I would not do the college savings fund, but would put the money in a Roth IRA. Financial aid officers look at family savings for college and reduce their financial aid to the students accordingly. Roths are flexible and tax advantaged for you; compounding interest there at your early ages will be tremendously beneficial to your family finances.