A 96 Subaru AWD is a good bet actually if not an Outback.
It uses the 2.2L motor which had wonderful reliability on par with Honda/Toyota. I would look closely at rust. The AWD is a little added complexity but at this price point any repair would lead to junkyard. Subaru was pretty reliable make when they used the 2.2L motor.
MB is pricey in parts.
My sister in law drives a 96 Subaru in VT although severe rust in one spot (likey bondo fix) and it has exemplary reliability with 160k miles on it.
Iirc even the outback had the 2.2 in 95 and 96, then they actually raised the roof a little and put the bigger 2.5 into it…I could be wrong, might have only been 1995. But still if it runs and drives, $300 sube sounds good to me.
The Mercedes is old and parts and labor will be very expensive.
The Subie isn;t quite as old, but it’s still old. Parts and labor will be less expansive than comparable work on the Subie…but nobody over the internet can possibly know how much work either needs.
Whatever car you choose, be sure it gets a good going-over by a qualified ahop. And remember that while the engine needs to run reasonably, handling and stopping ability are the ones that will keep her alive. Consider the condition of the chassis and braking systems more important than the condition of the engine. Have those gone over thoroughly. Failure to start in the morning can ruin your daughter’s day, but failure to stop or steer can ruin the rest of her life.