I didn't know that it was bad for cats, but I have found it unaffordable for years now. I bought a paper shredder, which only cost me $40 in New Zealand, and used it to shred free circulars, bills, old newspapers... even rejection letters from employers. (That always felt good, especially since my cats were able to express their opinion about the letters, too.)
Anyway, I found that the cats were more than happy to use the shredded paper as litter. (If it gets a little too strong-smelling, add some baking soda to the tray.)
In no time at all, my shredder paid for itself!