If you plan to stay with the stock steel rims (I wouldn't) and I assume they are the odd Schwinn sizing? You could use the Koolstop Continental brake pads, they are an improvement. I would at bare minimum swap the steel rims for something like the Sun CR-18 alloy rims which are available in the 27" size as well as several others. At least you would have a better choice in tires.
Aaron