puppy troubles

Question
About two weeks ago I adopted an 8 week border-collie mix,
at first he was really good with going potty outside , he
is very smart but about a week ago I guess he heard a loud
noise and it petrified him , now any little bang makes him
run to me cowering, and to make matters worse he no longer
wants to go potty outside. I'm also concerned because a few
days after I got him my roommate got a 5 week beagle-lab
mix. My puppy is becoming obsessed with his little friend ,
so I try to keep them apart as much as possible but thats
kinda hard! please help with any advise you can give I'm at
a loss

Answer
At 8 weeks, your puppy is at the beginning of a natural fear phase, biologically designed to keep puppies leaving the protection of the den from engaging in behaviors that might cause their premature death.  It can last two to three weeks.  Your puppy acquired a strong conditioned response to whatever noise occurred and this fear has generalized.  His running to you approximates the behavior of type, which is to run back to the dam (mother) or primary caregiver, in this case, you.  Your reaction to his fear can mean the difference between a lifelong problem or a short term inconvenience, but you may already have "set" the fear response.  Attempting to comfort or console a dog that is fearful actually rewards the fear.  From now on, if he approaches you with what is obviously a fear reaction, distract him.  Get up and call his name in an excited way, clap your hands and encourage him to follow you, then reward him for that.  Meanwhile, he's at a good age to begin positive reinforcement training and play training is the best method for the Border Collie.  Check it out here:
http://www.dogplay.com/Activities/obedience.html

Make sure your training regimen is age appropriate, no more than five minutes at a time right now.  Once he has begun play training, you can distract him from any fear response with the play training object.  Positive reinforcement training builds confidence in any dog and enhances the bond of trust between dog and owner.

Regarding your roommate's puppy, this is WAY TOO YOUNG for a dog to be removed from its litter mates and dam!  Both puppies need time together to acquire bite inhibition and use one another as "litter mates" in order to develop normal body language interaction; however, they should not be bonding to ONE ANOTHER; separating them and spending time with each one is very important.  You can't control what your roommate does or doesn't do with his/her puppy, but you need to do certain things to be sure YOUR puppy becomes a confident adult dog.  He clearly has a predisposition to fear and he needs to be heavily, but carefully, socialized.  I suggest you find a puppy kindergarten for him but be certain it is AGE SPECIFIC (all puppies at the same developmental stage), NO rigorous training of any sort should be taking place (only supervised off leash interaction with some light training) and ONLY positive reinforcement.  Go "interview" the class before making the commitment and be sure the trainer is very experienced; ask for references.

Regarding your puppy's acquired fear of the outdoors, take him to a new location but one that is quiet; if you use the left corner of the yard, use the right corner.  Be persistent, take him out every 90 minutes if you have to; eventually he will urinate and when he does praise him (softly but enthusiastically) and give him a tiny treat.  Repeat this a few times and he will return to the course he was on before the incident.

Learn about how to interact with your puppy, what to expect from him and how to turn him into the adult dog you want by reading:
"Before and After Getting Your Puppy" by Ian Dunbar, DVM