We discussed a similar question about stopping contributions to your 401k's to pay off credit card debt. I know you love your children and want the best for them. This is going to sound selfish, but you should not stop contributing to your 401k to fund your children's college education.
If you are looking for additional funds to pay for your children's education then it is obvious that you probably don't have an emergency fund either. Right now in the current state the economy is in, it is imperative to have an emergency fund of least six to eight months of expenses.
Again I know you want your children to be able to live up to their full potential, but jeopardizing your financial security is not the way to do it. Also in this point in time, your 401K has probably taken a beating. When people's investments tank their instincts tell them to run, but this is not the time to run. It is the time to stand and fight. You need to keep your money in your 401k and continue to invest even though it doesn't seem like the right thing to do. I am assuming that you have at least ten years until you retire. The reason I am telling you to keep your money in your 401K is this: When the market is down you are able to buy more shares of what you are investing in, and the more money you will make when the stock market goes back up.
Also, you are going to need as much money as you can get your hands on when you retire. With the threat of social security being gone one day your 401k, IRA's, and cash savings will be all that you will have to rely on. If you don't have retirement savings you may one day be a financial burden to your children. So unless you want to work for the rest of your life or live with your children after retirement don't withdrawal funds from your 401k to pay for your children's education. I am not telling you to leave your children high and dry without an education. There are several federal loan programs to choose from, whether it be the military, employer tuition assistance, or loan forgiveness programs to pay for a college education.
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