We use Bed Excel for in rat cages. This is made from recycled, shredded cardboard. It has no dust which is good because dust can give them respiratory diseases.
In addition, we keep our shredded letters for the rats to build nests with.
Most pet shops supply sawdust/wood shavings for the bottom of cages. Its absorbent and smells nice but this can can cause respiratory inflammation in rats (and other small animals).
We recently experimenting using hay in the bottom of our cages - which resulted in an outbreak of rat mites!
Rats can be litter trained (for poo at least - we've not convinced ours to pee in their litter trays). Using a good litter in a litter tray helps to keep down the smell and means the cages don't need cleaned quite as often.
We use recycled paper cat litter. You should avoid mineral based litters as this can damage their teeth.