NEVER EVER USE CEDAR WOOD BEDDING.

There, I got that out of the way.

Cedar, and to a lesser extent pine, emit chemicals that can badly damage the sensitive respiratory systems of your rats. As a rule of thumb, avoid any strongly scented bedding. What smells good to human noses from several feet away is misery for the noses of rats, which are ten times more sensitive and only a few inches away from the source of the smell.

Beyond that, there are a variety of choices and everyone's solution is different. I personally use fleece fabric in the cage, and unscented KayTee SoftSorbent in the litterboxes. Others use different brands of cotton bedding, recycled newspaper pellets, rabbit food pellets, aspen shavings, and recycled corncobs. Experiment and see what works best for you and your rats.  Plan on changing the cage linens every other day, sometimes more often. Unlike desert rodents such as hamsters or gerbils, the urine of rats is strongly scented and prodigious in quantity. The resulting ammonia is good for neither humans nor pets. I change cage linens and litter boxes, and spot clean with disinfectant, every other day. I also thoroughly disinfect the entire cage once a week. I recommend spraying hydrogen peroxide, rinsing clean with water, then spraying either vinegar or diluted bleach, and rinsing again. Be very careful when mixing household chemicals (including the ammonia in the urine) and observe all safety precautions! You may also use SimpleGreen.

Rats can be litter box trained, although they're rarely as reliable as a cat, rabbit, or ferret. Most commercial litterboxes sold for small animals seem to be too small, so I use box lids or larger shallow-sided plastic containers filled with cotton bedding, then lightly sprinkle commercially made "potty litter" inside. Somewhat surprisingly, my bucks are much better about using their boxes than my does are, but all of them use the litter box regularly enough to make it a worthwhile addition to the cages.